Ok,
If you are a musician or are looking to play at a church, there are some things that you should know when it comes to setting up your contract.
1. Find out if your church is exempt from paying social security, fica, medicare etc...
If your church doesn't pay social security, fica, medicare etc... then you will have to take a percentage of your earnings and send it in yourself to the IRS or pay it out at the same time (or set up payments) because you will end up owing the IRS. I know because that's the situation I'm in right now. If I would have known earlier
2. Find out if your church is going to pay you as an employee with a w2 or as an independant contracter with a 1099.
The difference is if your church pays you as an employee then they will have to pay I think the number is 6.75% of you income for tax purposes. You as the employee will have to pay 6.75% also. If you have a church that will not pay their 6.75% then you will have to pay the 13% of your income yourself. It's legal for churches to use their tax exempt status and not pay social security benifits for you. It is pretty common practice. The only way you can offset that penalty money wise is to tell your church to withhold 15%-20% of your check as the year progresses.
3. If you are a clergy member, there is a way that your church can pay you and it be tax exempt. The way to do that is to have them pay you a housing allowance instead of a salary. I'm working with my church now to change not how much they pay me but the way they pay me.
4. If you play for concerts/revivals/workshops etc... on the side for churches, make sure those churches give you a 1099 form because if they report to the IRS that they paid you $500 for something and you don't report it, YOU can get caught up for not reporting income. Believe me, the IRS is cracking down on people not reporting their income and it would be in your best interests to not lie when you file your taxes.
MrSparrow
