Church Payroll 101: The Right (and Wrong) Way to Pay Pastors

Understanding clergy tax laws can be confusing, and getting it wrong can lead to costly mistakes. In this episode of the Church Advisory Podcast, hosts Tim Wilkins and Steve Chaney, CPA break down how church payroll, housing allowance, and self-employment taxes impact pastors and church staff. We cover: Do pastors get a W-2 or a 1099? Understanding clergy tax classification How pastors pay Social Security & Medicare taxes (and why it’s different from regular employees) Common church payroll mistakes that can cost pastors thousands in unexpected taxes How housing allowance affects a minister’s tax liability Why rent-free doesn’t mean tax-free – the hidden costs of parsonage benefits Church payroll best practices to ensure compliance and protect pastors from tax surprises If you're a pastor, church administrator, or financial decision-maker, this episode is for you. Not sure if your payroll is set up right? Let's take a look. Schedule a free payroll assessment: https://chaneyassociates.com/contact/ Did you find this helpful? Subscribe so you don’t miss future episodes, and join the conversation! Drop your questions in the comments—we’d love to hear from you. Chapters: 0:00 - Welcome & Recap of Housing Allowance 1:00 - Are Pastors Employed or Self-Employed? 6:00 - Understanding Dual Tax Status & Payroll Taxes 9:00 - How to Check Your Pay Stub for Errors 10:30 - Common Payroll Mistakes Churches Make 20:00 - Should a Pastor Ever Decline Housing Allowance? 23:30 - Why Churches Should Offer a Self-Employment Allowance 29:00 - How to Calculate the Cost for Your Church 32:00 - Setting Up Payroll Withholding for Ministers 48:00 - Closing Thoughts & Where to Get Help About Us: For over 23 years, Chaney & Associates has partnered with churches across the country, providing accounting, payroll, and financial guidance tailored to ministry needs. As trusted ministry advisors, we’re passionate about equipping churches to manage their resources effectively and expand their mission. DISCLAIMER: This podcast is for informational purposes only and is not a substitute for professional advice. Always consult your CPA or legal advisor before making financial decisions.