Synagogues-Flouting Employment and Tax Laws–where is the DINA D’MALKHUTA DINA?

On a local supplemental Jewish religious school principals list I belong to, many questions have come up of late about  educators being paid as independent contractors, and other issues of employment and tax law. There are a lot of misconceptions out there. Here is one of the replies I wrote, which I hope may also be of value to my readers. Note especially the information about Independent Contractors vs Employee; special tax treatments for clergy; the confusion between Self-Employment and Independent Contractor, etc,
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Folks:
There is a lot of bad, incorrect information out there regarding tax/employment law and synagogues. In addition, many lay leaders at synagogues do NOT have a clear understanding of tax law. I’ve already made my case regarding "independent contractors." Most synagogues and churches are deluding themselves when trying to get away with treating employees as independent contractors. Churches and synagogues get no special treatment in this regard. Most people are just confusing the special tax treatment of ordained clergy with a generic concept they believe is applicable to all who work for them. That is an incorrect assumption.
A reminder to visit:
www.irs.gov/businesses/small/article/0,,id=99921,00.html

It’s generally clear but, and, in most cases, you’ll find that most people who work in a synagogue are employees and not independent contractors.

There is also a great deal of confusion between the terms "Independent Contractor" and "Self-Employed." The fact is, most rabbis or hazzanim who work for one congregation are employees, but their salary is treated as self-employment income. Rabbis/Hazzanim are considered self-employed for Social Security and Medicare taxes, so the synagogue does not have to withhold or report these taxes even if the rabbi is an employee and the synagogue withholds income taxes. A rabbi/Hazzan does have to pay self-employment taxes, (i.e. for Social Security and Medicare.) (A rabbi/hazzan can choose voluntary tax withholding as an option.)
If you are a rabbi/hazzan, but not performing the usual duties as defined by the IRS, you don’t get the special treatment. (An ordained rabbi working as a programmer for Apple is not treated as a rabbi for tax purposes in re his work for Apple, but if he does rabbinic work on the side as an Independent Contractor, that income is treated a ministerial income.)

But if you are not a rabbi/hazzan, then, chances are you do NOT qualify under IRS regulations for parsonage or to have all your income treated as self-employment, except under very special circumstances.

If you are a Director of Education or a teacher, chances are that you are a regular employee. (Remember, Rabbis/Hazzanim are considered employees for the most part-it’s just their income is treated as self-employment income and withholding is NOT required-but they also have to pay the higher self-employment tax rate for FICA and MEDICARE.)

I urge everyone to read this link:

http://books.google.com/books?id=xJfWZNHo6nkC&pg=PA214&lpg=PA214&dq=minimum+number+of+employees+withholding&source=web&ots=_7saf4q4JX&sig=47LedCAn6CqwEIEzKT_Xg9OBWqU&hl=en&sa=X&oi=book_result&resnum=6&ct=result

There is no "minimum number of employees" before a church or synagogue has to withhold taxes and pay the matching FICA and FUTA. Few, if any, teachers or Directors of Education would qualify as bona-fide  clergy to be eligible for the special treatment-payment as a "minister", and qualify for parsonage (housing allowance.)

Now, as to whether or not you might be eligible to receive parsonage, and have your income treated like regular clergy, that’s a whole different ball of wax.
While it is true that the IRS is loathe to get into a tussle about who is and is not a bona fide minister qualifying for parsonage, anyone seeking parsonage must at least meet the minimum expectation that they do, on a regular or substitute basis, provide essentially all the functions of ordained clergy.

Here’s another great resource on defining a "minister" for tax purposes:

http://www.churchlawtoday.com/newminlesson.php?136

In the church world, some "Ministers of Education" are given parsonage, and some are not. A lot depends on the specifics of their responsibilities.

As I’ve stated before, dina malkhuta dina (the law of the land is the law.) If your synagogue is not following IRS regulations, then it seems to me you are obligated for tokhekha (rebuke.)

I’ve already been on a 10 year campaign to get synagogues to stop breaking copyright laws (how much music gets photocopied for your choirs? How many CDs or restricted mp3 downloads have been illegally duplicated for your teachers? How many textbooks have you copied? Remember-synagogues are NOT eligible for the educational exemptions under copyright law.And Jewish songwriters need their parnassa, or they will have to stop writing music.) Seems I’m going to have to add a campaign to get synagogues to follow employment law as well. I’m sure I’ll have that presentation worked up for CAJE 34 in 2009.

Kol tuv,

-Adrian
©2008 by Adrian A. Durlester

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About migdalorguy

Jewish Educator & Musician, Technology Nerd and all around nice Renaissance guy
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