IRS & Salary at Bethel

by Phil 17 Replies latest jw friends

  • Phil

    As a result of the info in "Salary at Bethel" by JT (post #3871 dated 20 Dec'03), I contacted the IRS to see what the regulations are regarding the impact on Social Security and income taxes when a person gets a very small salary with compensation in the way of room and board. The following answer seems very complicated and convaluted. However I am interested in any comments you all have on the subject.A question I have is "Are all of the people in Patterson and Bethel ordained ministers of the WTBS? Is the manipulation of the salary figures legal?

    NOTE: Our response to your tax law question appears below. If you have a follow-up question or another general tax law question, please return to our web site at: ( to submit it. Please do not use your "reply" button to respond to this message. More helpful information is provided at the end of this message.

    Your Question Was:
    What are the conditions where an employer can pay an employee a lower salary and provide benefits that include room and board as part of employment agreement and result in the employer to not be obliged to collect taxes because the salary is too low to be taxed? Can a religious organization do this?

    The Answer To Your Question Is:
    Thank you for using our e-mail service. We apologize for the delay in responding to your inquiry. Your statement 'can a religious organization do this' is prompting me to respond to this question from a clergy point of view and yes they can.
    Special rules for housing apply to members of the clergy. Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. However, the exclusion cannot be more than the reasonable pay for your service. The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.
    The services you perform in the exercise of your ministry are covered by social security and Medicare under SECA. Your earnings for these services are subject to self-employment tax (SE tax) unless one of the following applies.

    You are a member of a religious order who has taken a vow of poverty.
    You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. See Exemption From Self-Employment (SE) Tax, later.
    You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. For more information, see Binational Social Security (Totalization) Agreements in Publication 54.
    Your earnings that are not from the exercise of your ministry may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. See Qualified Services, later.

    If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax unless you have requested and received an exemption. See Exemption From Self-Employment (SE) Tax, later. These earnings are subject to SE tax whether you are an employee of your church or a self-employed person under the common law rules. For the specific services covered, see Qualified Services, later.

    Ministers Defined
    Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination.

    If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes.

    Employment Status for Other Tax Purposes
    Even though you are considered a self-employed individual in performing your ministerial services for social security tax purposes, you may be considered an employee for income tax or retirement plan purposes. For income tax or retirement plan purposes, some of your income may be considered self-employment income and other income may be considered wages.

    Common-law employee. Under common law rules, you are considered either an employee or a self-employed person depending on all the facts and circumstances. Generally, you are an employee if your employer has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. For more information about the common-law rules, get Publication 15-A, Employer's Supplemental Tax Guide.

    If you are employed by a congregation for a salary, you are generally a common-law employee and income from the exercise of your ministry is considered wages for income tax purposes. However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are considered self-employment income.

    Example. A church hires and pays you a salary to perform ministerial services subject to its control. Under the common-law rules, you are an employee of the church while performing those services.

    Form SS-8. If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8.

    Members of
    Religious Orders
    If you are a member of a religious order who has not taken a vow of poverty, your earnings for qualified services you performed as a member of the order are subject to SE tax. See Qualified Services, later. This does not apply if you have requested and received an exemption as discussed under Exemption From Self-Employment (SE) Tax, later.

    Vow of poverty. If you are a member of a religious order who has taken a vow of poverty, you are exempt from paying SE tax on your earnings for qualified services (defined later) you perform as an agent of your church or its agencies. For income tax purposes, the earnings are tax free to you. Your earnings are considered the income of the religious order.

    Services covered under FICA at the election of the order. Even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members.

    The order or subdivision elects coverage by filing Form SS-16. It can elect coverage for certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. You do not pay.

    Services performed outside the order. Even if you are a member of a religious order who has taken a vow of poverty and are required to turn over to the order amounts you earn, your earnings are subject to federal income tax withholding and employment (FICA) tax if you:

    Work for an organization outside your religious community, and
    Perform work that is not required by, or done on behalf of, the order.
    In this case, you are considered an employee of that outside organization. You may, however, be able to take a charitable deduction for the amount you turn over to the order. See Publication 526, Charitable Contributions.

    Lay employees. Lay employees generally are covered by social security. However, see Election To Exclude Church Employees From FICA Coverage, later, under Religious Workers.

    Rulings. Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. To request a ruling, follow the procedures in Revenue Procedure 2002-1, which is published in Internal Revenue Bulletin 2002-1.

    You can read this Revenue Procedure at most IRS offices or, if you have a personal computer, visit the IRS on the Internet at

    To subscribe to the Bulletin, you can order it on the Internet at http://bookstore.gpo.
    gov/irs. You also can write to:

    Superintendent of Documents
    P.O. Box 371954
    Pittsburgh, PA 15250-7954.
    Now,whether your salary is to low to be taxed depend on whether you have a filing requirement. If you are a U.S. citizen or resident, whether you must file a return depends on three factors:

    Your gross income,
    Your filing status, and
    Your age.
    To find out whether you must file, see Table 1-1, Table 1-2, and Table 1-3. Even if no table shows that you must file, you may need to file to get money back. (See Who Should File, later.) ref Pub 17.

    Gross income. This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. It also includes income from sources outside the United States (even if you may exclude all or part of it). Common types of income are discussed in Part Two of this publication. ref Pub 517 & 17.

    IRS forms and publications may be accessed on our web site at the following address: or ordered through our toll-free forms line at:
    which is available 24 hours a day, 7 days a week, with 7-10 days delivery time.

    Other useful toll-free numbers include:
    800-829-1040 IRS Tax Help Line for Individuals
    (NEW) 800-829-4933 Business and Specialty Tax Help Line
    (NEW) 800-829-1954 Refund Hotline

    We are interested in your opinion and providing the best possible service to you. Please take a moment to answer our survey at:,,id=13155,00.html
    This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer given.

    Here's a tip for navigating the IRS web site. Use the "search" button at the left side of the web page. Enter key words or phrases for your topic in the entry box. It could help you find your answer immediately.

    EMPLOYEE ID: 5804896 Mr. Davis Tel.:(800)829-1040 msg#: 1598276

  • dustyb

    i'm a dumbass when it comes to taxes....

  • darkuncle29

    I'm doing my dad's taxes tomorrow. The language they use is always kind of hard to wade through as no one actually speaks like that, unless in a legal or tax profession.

    I do think that if someone were to get documentation or other evidence of Bethelites "moonlighting" and turn that over to the IRS fraud division, it may cause some problems for them. Social Security might even get involved. If govt. agencies could move the curtain aside and see what the great OZ is doing, that would be really fun to whatch.

  • AlanF

    Briefly, the "vow of poverty" mentioned in the material you quoted pretty much rules. I don't know all the ins and outs, but the Watchtower Society requires all Bethelites to take a vow of poverty, and thus exempts itself from having to deal with Social Security and a host of other tax issues.


  • dustyb

    thats a shitty thing to do to avoid paying taxes to teh government. you shouldn't be allowed to make a vow of poverty, especially when you make as much money as JW's do....

  • Eyebrow2

    tax stuff aside, every baptise witness is considered an ordained minister

  • mustang

    Roughly, this is how it works:

    As Alan mentioned, they all take a Vow Of Poverty. This is mentioned in massive detail in parts of USC Title 26, I believe. (That's United States Codes, or Code of Federal Regulations; Federal law for short.)

    Ministers are who this applies to and churches are why the Vow Of Poverty exists in the first place. It is patterned after the traditions of the Catholic Church (Roman Catholic Church or RCC). Remember, the RCC has had Monastic Orders for well over a millennium. This whole situation has evolved out of "Canon Law".

    This is how the Catholic Church solves its tax issues. Both the RCC & the IRS breathe easier with a pigeonhole to place those people in. The same goes for Brooklyn.

    The Title 26 stuff is long, repetitive and boring. I haven’t read it in about 2 years, but I can find some more specific references. I also recollect that another Title has some of this, as well. Some of the wording is very circular and is repeated multiple times for similar issues.

    Consider the following, as a summary:

    1) Basically, the person involved is allowed to declare that he is a volunteer worker.

    2) At this point, the worker is required to execute the Vow Of Poverty (VOP). This nominally means that he receives no formal pay.

    3) Further, his room and board is considered compensation that is not required to be declared as income. The two (room/board/compensation and labor exchanged) seem to be considered as mutually offsetting each other.

    4) However, the government seems uncomfortable with having a 0$ value placed on anyone’s productive work. Therefore, an "allowance" is mandated. An arbitrary value is mentioned in Title 26; this is 1200$/year (100$/month), as I recollect.

    5) This allowance and the discounting of the compensation rates of the room and board combine to make the income of the person taking the VOP less than the lower end of the rates covered in the Tax Tables. Effectively, the volunteer has been impoverished and appears to be so in the eyes of the Tax Law.

    Apparently, this whole situation was a "bone of contention" for ages with the WTS, the Taxman and likely with other churches as well.

    A probable (but not final or binding in accuracy) scenario (presented in fairy tale format) is as follows:

    The Taxman cometh; he looks over the books, shakes his head and points his finger. On a good day for Brooklyn, the Taxman is reminded of the "Non-Profit Status" of the wonderful "Organization". Surely this situation covers the THOUSANDS of people roaming the halls that are NOT properly pigeonholed in the Taxman’s ordered worldview, contends Brooklyn.

    Surely they are, but where... the Taxman cannot see it. So he packs up and leaves, muttering and grumbling. He is not happy. He does not think that the "Organization" is so wonderful.

    The Brooklyn Accountants are not happy. The Taxman will be back; he said so.

    And so he returns. This time he does not buy the shallow deflection of the NPS shield. It’s not good enough. The Taxman goes for more; he is threatening Legal Action, fines, sanctions...

    The Legal Action commences. It is beat down and deflected by motions, appeals and countersuits or threats thereof. There is a way to do this that makes things very distasteful to the Taxman. He backs off.

    This cycle repeats, over and over; there is an ongoing stalemate and a standoff situation exists.

    Again, Brooklyn is not happy. Much pondering goes on and the midnight oil is burned. A Junior Accountant is tasked to ask advice of the Legal Staff. Dusty tomes are opened, to no avail. More research is commissioned... Library Cards are pulled out of desks. (But that is another story...)

    Suddenly, someone remembers the other churches; this fellow is from a Catholic family. He has a brother who is a priest, another who is a monk. A field trip is arranged.

    "How do you handle this...", the question is posed.

    "Why a VOP; it’s simple, see Brother Shylock, the Church Lawyer. Canon Law goes back over 1600 years..."

    Suddenly it all clicks: there is a method to appease the Taxman. The Junior Accountant returns and he relates his findings. He is promoted to Senior Accountant overnight. His career is fast-tracked to heights he had not imagined. He will not have to use his brain again for the rest of his life!!!

    Even Legal is taken by storm with this: this will work!!! It is the answer!!!

    This is taken upstairs: the GBuzzards get wind of this. They proclaim that this is New Light and a massive victory. The head Buzzard decrees that this shall be done.

    Throughout all the halls of the HQ, goes the cry "Vows Of Poverty, VOP’s for all, all shall bend the knee to the wondrous VOP".

    And it is done, the announcements go forth: "Brother, your 14$/month is too meager; we are giving you a raise. You really deserve this 100$/month. Uhhh, sign here..." and a paper is thrust into his hands.

    The next cycle approaches and with it comes the Taxman. The Taxman finds, lo and behold, VOP’s from USC Title 26!!! Glory be!!! All can be rectified!!! These THOUSANDS of unaccounted for creatures can now be pigeonholed, into an existing codification. The Taxman leaves, a happy man.

    Epilogue: years go by... all the dust has settled for more that a decade. The other part of the scheme learned from the Catholic church can be implemented. There are clouds on the horizon and trouble looms. Shields must be put in place. Divisions are created and change happens: new Corporations are formed.

    And into existence comes the first Religious Order ever in the history of Jehovah’s Witnesses.

    Well, the scenario might not have gone down quite that way. I have taken some serious literary license here, for sake of illustration. The Taxman might have suggested this for instance. But I have been told that something close to this transpired. And considering the circumstances, something of this nature had to have happened.

    I realize that this may offend the sensibilities of some, but the law is set out in this manner.


  • mustang

    "I do think that if someone were to get documentation or other evidence of Bethelites "moonlighting" and turn that over to the IRS fraud division, it may cause some problems for them. "

    It is my understanding that there were indeed some small skirmishes over this. Those led to a "knock-down, dragout" over this. In other words, the "S*%$ hit the fan".


  • darkuncle29

    I enjoyed your story, thank you Mustang. So do you think that nobody in bethel Moonlights anymore, or are they much more careful?

  • mustang

    I think that it was rampant at one time. WTS got blindsided by it and "came down hard" on it. Supposedly, it no longer happens. But, likely a little still goes on and everybody is very careful about it.


Share this