We recently went over Form 4361, the IRS document used by pastors to receive an exemption from self-employment taxes. If you’re not familiar with it, you should go back and read about it here. One thing we didn’t discuss in that article, though, was the timing. That’s because I didn’t want to overwhelm you with too much information. So, today we are discussing the timing involved and I will give you multiple examples to make things as clear as possible. It is important that you understand when Form 4361 can be filed because once your window of opportunity is gone, it is gone forever. Is There A Time Limit For Pastors To File Form 4361 To Opt Out Of Social Security? Specific dates are requested on the form because you only have a small window of time in which you are allowed to opt out of Social Security. Form 4361 must be ...

I recently announced that I have obtained the Certified Financial Planner™ designation. As a result, I got a number of responses asking what kind of services I offer as a financial planner. One generous reader even wisely told me, “a more ‘aggressive’ tooting of your own horn would be appropriate.” I hear you. Today I’m going to tell you about what I do beyond this blog, in case you want to be a part of it.  Financial Planning Services I offer financial planning services through Guide Financial Planning. This is a different company than Pastor’s Wallet and I do not own it. Financial planning and investment management is a very highly regulated industry so it requires a different business entity than the educational content I provide through Pastor’s Wallet. I was originally planning on starting my own financial planning firm in order to have complete control over my schedule, who I serve, and how ...

If you’re new to the ministry, you may have heard about Form 4361 from someone. Likely another pastor has mentioned it and told you that it will save you a lot of money. What is this mysterious money-saving piece of paper? What Is Form 4361? Form 4361 is an IRS document that is used by ministers to opt out of public insurance programs. You can view the form itself here. Its official name is Application for Exemption From Self-Employment Tax for Use By Ministers, Members of Religious Orders and Christian Science Practitioners, which is why most people just refer to it as Form 4361. The title references being exempt from self-employment tax because that is what is used to fund the public insurance programs Social Security and Medicare. An exemption means you don’t have to pay the taxes but you also don’t get to benefit from the programs (based on your exempt ...

As you probably know if you read this blog (or can find out here), pastors have to pay both the employee and employer portions of Social Security and Medicare taxes as if they were self-employed. Those Social Security and Medicare taxes are also called SECA taxes, which is a lot faster to type so that’s what I’m going to call them from here on out.  What Is A SECA Offset? Some churches feel kind of bad that their pastors have to pay twice as much in SECA taxes than any other employee in the US. Since they aren’t allowed to pay SECA for their pastors, they instead pay them a little extra to cover the cost of the tax. That extra pay is called a SECA offset or Social Security offset.  Even though it’s called a SECA offset, it’s technically just additional pay. In the eyes of the IRS, it’s just more taxable ...

Having a baby comes with a lot of responsibility and a long to-do list. Here are the things you should do legally and financially to set yourself up for success once your little one arrives. View post

This post mentions some specific investments. They are only examples and not an endorsement of those investments. Perhaps the most difficult, or at least most intimidating, thing about saving for retirement isn’t finding money to set aside, but rather choosing how to invest that money. After all, 1 in 5 Americans who aren’t invested in the stock market says it’s because they “don’t know enough.” What Is A Target Date Fund? Because of this, in 1994, a new kind of mutual fund was created: the target date fund (TDF). It is a kind of investment designed so that you can just put your money in and forget about it until it’s time to take your money out. You will recognize them because they have a future date in their name, like LifePath Index 2040 Fund or T Rowe Price Retirement 2040 Fund. View post

This is a guest post by Jon Neal, Executive Pastor of Hope Community Church in Minneapolis, MN. He has nothing to sell or promote, he just spent a lot of time researching this and thought he would share his efforts to be a blessing to you.  There is something very powerful in getting outside your normal context. Maybe you have an upcoming sabbatical. Or maybe you are looking for a place to take a quiet/planning retreat. Or maybe you're just looking for a place to take the family for a few days. There's just one problem - lots of those options cost a lot of money! While you could still scour Airbnb or VRBOs, there are many "off-market" properties available to pastors, some completely free of charge! The difficulty is that they often take a bit more effort than a simple Google search, so many rarely do it. However, these simple strategies ...

Tax season has just come to an end and most of us are either eagerly awaiting a return or bemoaning how much we had to pay. The rest of you filed an extension and are still trying to get your papers together or get your tax preparer to answer your calls. Isn't tax season fun? If you haven't opted out of Social Security, then you would have filed Schedule SE to calculate your Social Security and Medicare taxes, also called payroll taxes. Front and center, in the biggest, boldest print is the title for Schedule SE: Self-Employment Tax. But if you're a church employee and not self-employed, why are you filling out a form for self-employment taxes? Allow me to enlighten you. View post

A lot of people treat budgets like New Year’s resolutions. They are lofty and unrealistic goals with only an 8% chance of becoming reality. But that’s not how it’s supposed to be. Budgets are supposed to be personalized money management tools that help you take control of your finances. If you don’t have a greater sense of control and empowerment, then your budget isn’t working. If you don’t have the kind of budget I’m talking about, then you really need one. Follow this link to learn how to make a budget that serves as a GPS and not a jail cell. Once you’ve got your GPS budget going, here are a few simple ways to make budgeting easy and effective: View post

The clergy housing allowance is touted as the greatest tax benefit available to pastors. And it really is a great benefit. I learned back in 2019, though, that it can have a dark side. Not a Darth Vader using the Force to crush you kind of a dark side, more like a "If I hadn't claimed so much, I'd be $1,000 richer" kind of dark side. The problem is how it can affect the Additional Child Tax Credit, which is a major benefit for pastors with children. How The Clergy Housing Allowance Affects The Child Tax Credit One of the provisions of the tax reform that passed 5 or so years ago, one of the few points that everyone liked, was the doubling of the Child Tax Credit (CTC). Kids used to be worth $1,000 each and now they are worth $2,000. That still doesn’t feel like enough when your child is ...