There aren’t many things in life that are less fun than taxes. Nobody likes paying taxes. On the other hand, I’m not a big fan of anarchy either. So I will pay the taxes (income, property, and sales) necessary to pay for a government that attempts to defend our borders and assure our safety. My belief that a significantly smaller and less expensive government could do those things just as well, doesn’t mean I have any problem with the actual paying of taxes.
I do my own taxes. I always have. My Dad showed me how when I was fifteen years old. It started with a simple 1040EZ and eventually increased in complexity to where it now involves a slew of schedules, forms, and attachments. Nearly every year there is one additional thing to learn, but it’s never so complicated that a couple hours of reading can’t make it all clear. Funny thing is, despite our Byzantine tax code, the IRS has a lot of highly detailed instructions available for anyone to read. They actually try to make it understandable. It’s just a matter of taking the time to educate yourself. Or you can pay someone who is already educated to do it for you. But where is the challenge in that?
Being a minister comes with its own blessings and curses when it comes to tax time. The single biggest blessing is that ministers can receive a “housing allowance” that is exempt from income taxes. I have no idea why this is. Maybe our tax overlords give ministers a break because we tend to be poor. Maybe it’s for some really arcane reason. I don’t know, nor do I really care. But it is nice.
The biggest curse of being a minister is self-employment tax. Everybody that works for a company loses about 7.5% of their paycheck every time (currently it’s temporarily reduced to about 5.5%), primarily to pay for Social Security and Medicare. What you don’t see is that your company then matches your 7.5% “contribution” with an equal amount and then sends it all in to the government. When you’re self-employed, it all gets bundled together into one nice 15% tax on everything you earn (also temporarily reduced to 13%).
What does that mean? For every $100 you earn, the government immediately takes $7.50. For every $100 I earn, the government immediately takes $15. And that’s not just from salary either. Housing allowance or parsonage compensation is also taxed this way. It’s no fun. And it’s not just true for ministers, it’s also true for carpenters, small business owners, and lots of other people you hire to do things for you.
The other lousy part of being a minister is estimated tax payments. When you work for a company, taxes are easy. You fill out a form listing your expected deductions and HR plugs that into the payroll system. Then every time before you get your paycheck, they take out some of it to send to the IRS. You never see the money. Then every spring you file your taxes and they (hopefully) give back the amount your company overpaid for you. It’s a nice little spring bonus (or it’s an unfortunate spring surprise). When you’re self-employed, things work differently. When I get paid, nobody takes anything out of my check. I get to take 100% home. But it doesn’t last. By April 15 I have to guesstimate how much money I will make this year and consequently how much income tax and self-employment tax I will owe this year. Then on April 15, June 15, September 15, and January 15, I have to write a check for 1/4 of that amount. Every time I get paid I have to make sure I set money aside to pay to the government.
Taxes get a lot more personal when you have to write a check for every penny instead of it just magically disappearing from your paycheck before you ever see it. I’m convinced that everybody would want lower taxes and less government if they had to personally cut a check to the government for taxes every three months. Of course, compliance with the tax code would go way down. But hey, that might lead to a reconsideration of our entire Byzantine system of collecting federal revenue. And that would be a good thing.
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| Frankie double checked all our calculations. |
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