Doing ministry payroll and filing payroll taxes can come with a number of risks.
Risk #1: Inaccurate Payroll Tax Withholdings
Incorrectly completing, or failing to complete, government forms can create headaches for church or ministry payroll administrators. Incorrectly withholding payroll taxes can, too. A routine government audit or an issue reported by an employee can expose longstanding problems with payroll.
Mistakes commonly are made in the following areas:
Submitting payroll tax payments accurately and on time
Issuing accurate W-2s and 1099s
Making proper calculations for a ministerial housing allowance
Correctly applying minimum wage and overtime requirements to non-exempt employees
Understanding a clergy’s unique tax status
Regularly scheduling an audit of all payroll records
Tip: It’s important to designate someone in your organization responsible for monitoring government payroll tax regulations, especially those rules that apply to 501(c)(3) organizations.
Risk #2: Domino Effect of Payroll Problems
Payroll mistakes can trigger a chain reaction of consequences. Improper withholdings can put a minister’s housing allowance at risk and lead to thousands of dollars owed in back taxes. For support staff, basic elements of payroll, such as failing to track hours, can lead to misunderstandings, mistrust, and a sense of unfairness. A tainted reputation from legal issues or a disgruntled employee can have long-lasting repercussions.
Tip: Well-designed financial controls can help you avoid payroll issues. It’s wise to set up an annual meeting with a locally licensed attorney or tax accountant to ensure you’re using up-to-date and sound payroll practices.
Risk #3: A Stressed Payroll Staff
Time—as well as peace of mind—can be a big factor for a payroll processor. The pressure to accurately complete payroll, in addition to other administrative tasks, can lead to simple payroll-calculation errors that have long-lasting effects.
Consider the cost of time with these aspects of in-house payroll:
Staying current with government regulations
Tracking down employees’ timesheets
Frequent changes to employees’ tax or benefit deductions
Preparing for an audit
Tip: Look for ways to reclaim staff time. A trusted partner can work with your staff to help ease the stressors and risks associated with payroll.
Our Payroll team at Payroll & HR SolutionsBrotherhood Works would be happy to help you with these challenges. We offer payroll services and HR solutions for churches and Christian schools, camps, colleges, and ministries. Added features include payroll tax filing and reporting, time and attendance, HCM onboarding and talent management, and healthcare reporting, and more.
Updated September 2022
The information in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.
