It largely depends on whether the minister (pastor) is considered an employee or independent contractor (as determined by the common law control test). Essentially, Ministers receiving a salary from a congregation are generally considered employees under the common-law rules, with income from ministerial duties considered wages for income tax purposes.

However, a minister’s wages are not subject to FITW (federal income tax withholding), FUTA, or FICA. The wages are considered self-employment income subject to self-employment tax.

Additionally, amounts paid directly to a minister by members of a congregation for performing marriages, baptisms, or other personal services are considered self-employment income not wages.

Note, even though the minister is exempt from FITW, he may still want to make estimated payments to avoid underpayment penalties as the income is still subject to income tax (not to be confused with FICA or SE tax).

However, despite being exempt from FITW a minister/pastor who is considered an employee of a church under the common law rules can enter into a voluntary withholding agreement with a church to cover any income and self-employment tax (if no election was made for exemption) that may be due.