ESTABLISHING A CHURCH

How does a church obtain federal tax-exempt status?

 Incorporate at the state level.  It is not necessary to file IRS Form 1023 (which results in a hefty fee), to obtain formal recognition of your exemption.  Incorporation at the state level insures you federal tax-exempt status.

 What federal forms must be filed for employees?

 SS-4   Employers file this forms to request a Federal EIN (Employer Identification Number).

 W-4     All employees must fill out a W-4 for your records.  This form determines how much federal income tax is withheld.  If the pastor pays quarterly, and does not wish to have taxes withheld, he should mark his W-4 “exempt” and sign it.

 W-2     All employees should be given a W-2 each year.  For detailed instructions on filling out a W-2 for the pastor, see the booklet “The Pastor and His Income Tax”.

 W-3     One W-3 should be prepared to accompany all your W-2’s.  The W-3 acts as a face/summary sheet.

 941           This is a quarterly form, which needs to be filed if you have any employees in addition to pastoral staff (i.e. Janitor, secretary, etc.).

 What state forms must be filed for employees?

 Some states require state income tax to be withheld by the employer.  Be sure to check your state’s laws to determine your responsibility.  You may be required to withhold state income tax from the pastor’s wages, and file a state quarterly form to report and pay the amount withheld.