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Paying a pastor is not like paying anyone else. Paying the church secretary is, and that mix is where many Cincinnati churches slip. One person on your payroll follows clergy rules, the next follows regular employer rules, and both have to be right every pay period. We run payroll for churches and nonprofits so each person gets paid, and each report gets filed, the way the IRS expects.
When You Need Church & Nonprofit Payroll Help
Most groups call us at one of a few moments. You are hiring your first paid staff member. Your pastor’s housing allowance was never set in writing. A penalty notice arrived for a late payroll tax deposit. Or the person who ran payroll moved away and nobody else knows how. Payroll mistakes add up every pay period, so it pays to fix them early.
Our Church & Nonprofit Payroll Process
Ministers have what is often called dual status. For income tax, a pastor paid a salary is usually an employee and gets a W-2. For Social Security, the same pay counts as self-employment. So the church does not take Social Security or Medicare out of a minister’s pay, and the pastor pays that tax on their own return. The church also isn’t required to withhold income tax, but a pastor can sign a voluntary withholding agreement so tax comes out of each check. IRS Publication 517 on clergy taxes explains these rules.
The housing allowance must be set by the church in writing before it is paid. The pastor can leave it out of income tax up to the smallest of three amounts: what the church set, what was really spent on the home, and the home’s fair rental value plus utilities. It still counts for self-employment tax.
Everyone else gets regular payroll: income tax and FICA withheld, deposits made on time and Form 941 filed each quarter. We run payroll weekly, every other week or monthly, prepare W-2s and 1099s at year-end, and set up new employers with federal, Ohio and city tax accounts. We can also prepare a pastor’s own federal and Ohio return so both sides match.
Church & Nonprofit Payroll Cost in Cincinnati
Cost turns on the number of people paid, how often you pay them, and whether you have ministers and regular staff on the same payroll. Staff who live or work in more than one city add setup. A group that is behind on deposits or quarterly reports needs catch-up work first. You get our fee before we start.
City Tax for Church Staff Around College Hill
Our office is minutes from North College Hill, Mount Healthy, Forest Park and Springdale, and each one has its own city income tax. A church in Forest Park withholds Forest Park tax from its staff. If a staff member lives in Cincinnati, Cincinnati gives credit only up to its 1.8% rate for tax paid to the work city, so they may still owe Cincinnati the difference. We set up withholding so nobody gets a surprise bill in April.
Why Choose Us for Church & Nonprofit Payroll
Clergy pay is a narrow corner of tax law, and it is one we work in all the time. We have prepared taxes in Cincinnati since 1993 and keep the same hours all year, so a payroll question in August gets answered in August.
Payroll ties into our wider church and charity accounting work.
Common Questions
Does the church pay the employer half of Social Security for our pastor?
No. A minister's pay for ministry work is not subject to FICA, so the church does not withhold or match it. The pastor pays self-employment tax instead, often through estimated payments or a voluntary withholding agreement.
Can the housing allowance be set at the end of the year?
No. The IRS requires the church to officially set the allowance before paying it. Most churches approve it in board minutes before the year starts.