I don’t know about you, but as the finance director at my church, I often get asked to pay people for small jobs or events held at our church. Along with the request, it is often suggested that we just consider the person an independent contractor so we avoid all the hassle that’s required to make them employees.
Over the past couple of years, I’ve tried to clean up this area and make sure our church is handling these situations correctly. Why? Because I believe part of being a good steward and following biblical teaching is complying with the requirements of those who have authority over us. That means we do things the way the Internal Revenue Service (IRS) says we should do them. Yes, it is definitely more hassle and doesn’t win me more friends, but I can sleep better at night knowing that as a ministry we are appropriately fulfilling our responsibility to the government.
I often pull out my ECFA (Evangelical Council for Financial Accountability) Church and Nonprofit Tax and Financial Guide for guidance in matters such as this. Nowadays, though, I typically go to their website to see the latest version. It reminds me of all the factors you need to consider when handling these situations. Most often in situations like this our church makes the individual an employee because of the degree of control we have over the work being done.
Whatever your situation, I find it best to review these guidelines for every person who does work for your ministry to be sure you are handling things correctly. Yes, this usually means a little more effort on your part, but it’s time well spent to ensure that you aren’t putting your ministry at risk of misclassifying workers. The negative consequences of doing so could jeopardize your ministry in the future. I’ve also found that the IRS has some helpful resources as well. One I came across recently is titled Employee vs. Independent Contractor – Seven Tips for Business Owners.
How do you handle compensation for people who do occasional project work for your ministry?