Who is a Minister for Tax Purposes?
It probably comes as no surprise that how the IRS defines a minister for tax purposes may differ from the way many church members define a minister. In the eyes of most church members, a minister is typically someone who fills a ministerial role in the church, such as a pastor, student minister, or minister of music. However, simply filling a ministerial position at a church is not enough to declare someone a minister for tax purposes.
The IRS defines a minister using two sets of criteria: credentials and duties. A minister for tax purpose is someone who is duly licensed, ordained, or commissioned by a religious body constituting a church or denomination. It does not matter what position a person holds in a church or within the denomination. If they do not have at least one of the three credentials mentioned above, they are not a minister for tax purposes.
Also, note that a person does not necessarily have to be ordained to be considered a minister for tax purposes. Many a student pastor has been misclassified by their church because they are licensed but not ordained. However, a student pastor who is licensed is most likely a minister in the eyes of the IRS and should be treated accordingly.
Having credentials, in and of themselves, is not enough to be considered a minister for tax purposes. In addition to being licensed, ordained, or commissioned, a minister is one who performs sacerdotal (religious) duties. These include:
- administering the ordinances or sacraments of the church (Lord’s Supper, baptism, weddings, funerals, last rites, etc.)
- conducting religious worship
- having management responsibilities in the local church or denomination, and
- being considered a religious leader by the church or denomination.
If a person has ministerial credentials AND is performing the majority of the religious duties listed above, he or she is considered a minister for tax purposes. If either of the two criteria is not true, no matter what the person does in their church or denomination, they are not a minister in the eyes of the IRS.
It is important for a church to know how to treat their staff for tax purposes. Ministers and non-ministers are treated much differently when it comes to payroll and taxes, a topic which will be addressed in a future article. Therefore, it is incumbent upon a church hiring a new minister to know whether or not he or she is considered a minister by the IRS before their first paycheck is issued. Failure to do so could cause your church to be out of compliance with IRS payroll reporting requirements and/or cause your ministers to pay unnecessary taxes.