American Church Group - Colorado

Does Your Pastor Really Have 99 Kids?

Review your pastor’s Form W-4

We’ve all been victims of good intentions gone wrong, like when a best friend talks you into an unflattering haircut. Or, when your aunt tells you that owning 10 cats is better than just one.

Here’s another: A peer suggests that your pastor can claim 99 dependents on a Form W-4 because that’s how her church “has always done it.” Why do this? The reasoning seems straightforward: a claim of 99 dependents would ensure that a pastor’s pay is not subject to federal income tax.

What’s the harm?

Submitting an accurate Form W-4 is important, so unsurprisingly, an inaccurate claim can have serious consequences. The problem with a pastor declaring 99 dependents is three-fold:

1. It’s simply untrue. A signature on a W-4 declares that, “… I have examined this certificate, and to the best of my knowledge and belief, it is true, correct, and complete.” It is never a good idea to submit intentionally inaccurate information to the Internal Revenue Service (IRS). 
2. It’s a red flag. The IRS may consider this false reporting. If the IRS suspects under-reporting, it could trigger a review, a mandatory withholding rate, or a fine.
3. It’s an unnecessary risk. Because pastors are exempt from federal income tax withholding, they are not required to complete a Form W-4 at all. However, as a matter of policy, your ministry may want to have your pastor complete a W-4, documenting the decision not to withhold wages. To forgo withholding, simply have the pastor write “exempt” in box 7 of the Form W-4. This practice will be a more accurate statement than claiming “99” dependents.

Opting in

While withholding is optional, it is important to note that pastors are required to pay federal income tax like everyone else. A minister can “opt in” to withholding by voluntarily completing a Form W-4. A set dollar amount or allowance is subtracted from each paycheck to cover annual taxes. The IRS Withholding Calculator can help determine your pastor’s correct withholding allowance. Updating a Form W-4 requires a new form submission—changing or altering an existing form is not allowed.

Do you know a ministry colleague that uses the “99 dependents” practice? We encourage you to forward this article.

Contact a locally licensed attorney to ensure that any changes you want to make comply with your area laws.