Payroll Reporting Issues

Title: Payroll Reporting Issues
Category: Church Policy Issues
Subject: Payroll Reporting
Payroll Reporting Issues

This information was not authored by the Editor, rather the Editor serves as a contact person. This information was provided by the office of Keith Hamilton of the Georgia Baptist Convention.

Are you reporting employess payroll legally and correctly? This article can help.

Employee or Self-Employed?

Church employees should receive a W-2 for taxable wages. Contract workers should receive a Form 1099 if they received compensation over $600. As a general rule, the following church workers should receive a W-2: Pastors, Ordained/No ordained Ministers, paid Department Directors, Secretaries, Church Nursery Workers, Church Custodians, Organists, Pianists, and any other Support Staff. As a general rule, the following contract workers should receive a Form 1099 if they received compensation over $600: Lawn Maintenance Companies, Cleaning Service Companies, Supply Preachers, and Guest Evangelists. There are four recognized tests to assist in classifying a worker as an employee or self-employed.

The "preferred" test is the IRS "Twenty Factor" test. (Revenue Ruling 87-41) If most of the following factors apply, then the worker is considered an employee and should receive a W-2: (If in doubt, the IRS suggests the church treat the worker as an employee.)

The worker is required to follow an employer's instruction regarding when, where, and how to work.

The worker receives "on-the-job" training from an experienced worker.

The worker is expected to perform the services personally, and not use a substitute.

The employer, rather than the worker, hires and pays any assistants.

The worker has a continuing working relationship with the employer.

The employer establishes set hours of work.

The worker is expected to work full-time (More than 20 hours a week).

The work is done on the employer's premises.

The worker must submit regular oral or written reports to the employer.

The employer reimburses the worker's business expenses.

The employer furnishes the worker''s tools, supplies, and equipment.

The worker does not work for other employers.

The worker does not advertise his or her services to the general public.

The worker is generally paid by the hour, week, or month; not by the job.

The worker's service is integrated in the church's operation.

The worker must perform services in an order or sequence set by the church.

The employer furnishes all the necessary facilities (Equipment and premises).

Workers are not in a position to realize a profit or loss as a result of their services.

The employer has a right to discharge the worker rather than discharging the contract.

The worker has the right to end the relationship with the employer at any time he or she wishes

New Employee Check List

W-4 Each employee should have a completed W-4 on file with the church. Form W-4 allows the church to withhold the correct amount of federal income taxes and Social Security and Medicare taxes for each payroll period. (Note: Withholding for an ordained minister is voluntary, but completing a W-4 is required for ministers, too.) This form along with other Internal Revenue Service forms can be found at

G-4 Each employee should have signed and completed a G-4. Form G-4 allows the church to withhold the correct amount for Georgia income tax. Likewise, ordained ministers do not have to have state income tax withheld, but they do have to complete a G-4. This form and other state of Georgia forms can be found at

I-9 This information will be used by churches as a record of their basis for determining the eligibility of an employee to work in the United States. The form should be kept by the church and made available for inspection by officials of the U.S. Immigration and Naturalization Service, the Department of Labor, ant the Office of Special Counsel for Immigration Related Unfair Employment Practices. All employees should fill out this form. This form can be found at

New Hire Reporting-This is a state of Georgia requirement that all employees be documented by the state to reduce the number parents not paying child support. This form can be found at

If you would like additional information about Church Financial Services, please contact the Georgia Baptist Convention at or 1-800-746-4422. This document is intended to provide churches, pastors, and staff with current and accurate information about the subjects covered. However, such information is not intended to be sufficient for dealing with a particular legal problem, and the authors and distributors do not warrant or represent its suitability for such purpose. The reader should not rely upon this document as a substitute for independent legal consultation. Also, additional information is provided at the Annuity Board of the Southern Baptist Convention at