Payroll Withholding

[sonshine]

Our Music Minister is a grad student at a university and claims that he is exempt from having income tax withheld. How can I "modify" the Fed Tax-Single Tax Table, to keep the system from withholding income tax?

[NeilZ]

Our Music Minister is a grad student at a university and claims that he is exempt from having income tax withheld. How can I "modify" the Fed Tax-Single Tax Table, to keep the system from withholding income tax?

Before you do anything, I'd check with a tax advisor or the appropriate IRS publications to see if he qualifies because, according to IRS Pub 1828 :

"Churches and religious organizations are required to withhold, report, and pay over-withheld income and Federal Insurance Contribution Act (FICA) taxes for their employees."

" ... a church is not required to withhold income tax from the compensation that it pays to its duly ordrained, commissioned or licensed ministers for performing services in the exercise of their ministry." (Note the emphasis on ordained, commissioned or licensed ... someone filling a position called 'music minister' does not qualify one has being a minister)

"Substantial penalties may be imposed against an organization that fails to withhold and pay the proper employment tax."

Again, I would talk to a tax advisor or lawyer prior to doing anything.

[Author Message]

Thank you, I understand all that.

[Randy B]

Generally an employee can claim exempt from income taxes if they expect no income tax liability. You would get this off their W-4. The exemption from income taxes off the W-4 is good for only one calendar year meaning if the employee wanted to be exempt for another calendar year, then they would have to fill out another W-4. Consult IRS Publication 15 specifically page 14 and the W-4 instructions. You could just then zero out the tax manually.

[Zaphod]

Assuming all is ok with the IRS, to keep from witholding taxes in PowerChurch, just don't include the tax item in the Maintain Employee Pay Items screen for that employee. You don't want to modify the tax table, because that would affect your non tax-exempt employees.

I'm moving this topic to the Accouting forum.