Hi! My name’s Lane. Welcome. I hold a Law Degree, a BBA, an MBA (Finance Specialization), and CFP & CRPS designations as well. I’ve been providing tax, corporate law & accounting, financial, and Social Security advice to clients on three continents since 1986.

Please bear with me while I read your question and write my answer. Thanks.

First, churches are automatically tax-exempt under U.S. law, even without applying for 501(c)(3) status.

The First Amendment and Section 508(c)(1)(A) of the Internal Revenue Code specifically state that churches are tax-exempt by default and are not required to file for 501(c)(3) status to receive tax-exempt treatment.

Unlike other nonprofits, churches are also exempt from Form 990 filing requirements under IRS rules.

But here’s the problem:

The LLC Structure Complicates Things

The IRS does not automatically recognize LLCs as churches.

An LLC must elect to be treated as a tax-exempt organization or restructure into a church under traditional nonprofit rules.

Your Husband (the Pastor) Still Needs Proper Tax Treatment

Regardless of the church’s tax-exempt status, pastors are still responsible for self-employment taxes unless they opt-out using Form 4361.

He should NOT be labeled as a landscaper—his income should be clergy wages or self-employed ministerial income.

Simple Solution

Dissolve the LLC and treat the church as a church.

Issue a W-2 to your husband. He must still file Schedule SE for Social Security & Medicare taxes.

IRS View of Pastors:

• Employees for income tax (must receive a W-2)
• Self-employed for Social Security & Medicare (must file Schedule SE)

So:

• Church issues a W-2 (no FICA withheld)
• Pastor files Schedule SE and pays SECA tax (15.3%)

Housing Allowance (If Applicable)

• Designate it in advance in board minutes.
• Exempt from federal income tax, but not from self-employment tax.

Dissolving the LLC

1. Check Kentucky’s rules for dissolving an LLC
2. File Articles of Dissolution
3. Settle any debts or property ownership matters
4. After dissolution, register the church as a religious entity (can be unincorporated or as a nonprofit religious corporation)

To Legally Pay the Pastor & Issue a W-2

You will need:

• An EIN (Employer Identification Number)
• A payroll system
• Proper documentation, even for cash payments

Step 1: Get an EIN

Apply at IRS EIN Application Page

Choose “Church or Religious Organization” as the entity type.

Step 2: Set Up Payroll

Option 1: Payroll Software (Best Choice)

• Open a church bank account under the new EIN
• Use software (QuickBooks, Gusto, etc.)
• Issue regular paychecks
• Track income and taxes

Option 2: Manual Cash + W-2 (Riskier)

• Log every cash payment
• Issue a W-2 at year-end
• Pastor still files Schedule SE

This method carries audit risk and requires strict recordkeeping

Once the church has its EIN, it can legally pay your husband and issue a W-2.

Let me know if you have more questions—happy to help!

Yes, your church can still own its property even if it is no longer an LLC.

Churches are often structured as nonprofit religious organizations instead of LLCs. In Kentucky, you would register as a religious nonprofit entity (and optionally apply for 501(c)(3) tax-exempt status at the federal level).

Even if your church is not formally incorporated, it can still own property in the church’s name—as long as it has a proper legal structure and governing board (like trustees or a board of directors).

When you register your church, make sure the legal documents reflect that the church itself (not individuals) owns the property.

Yes, I would recommend changing the deed so that only the church holds ownership of the property. This protects the church’s assets and avoids confusion in the future.

Remember, no one “owns” a tax-exempt entity such as a church—technically it’s owned by the public. But the church can own property and other assets for use in its religious mission.

Regarding SECA, most payroll software does not automatically track SECA tax for clergy because ministers are treated as self-employed for Social Security & Medicare purposes—even if they receive a W-2 from the church.

However, some software can be customized to estimate or track SECA obligations. Otherwise, your husband would typically:

• Report SECA tax on Schedule SE (Form 1040)
• Make estimated quarterly payments, if needed

Lane (Payroll Software Recommendations):

Here are some clergy-friendly payroll software options that can help track SECA taxes and manage payroll for your church:

1. MinistryWorks (by Brotherhood Mutual)

• Designed specifically for churches and ministries
• Helps track SECA tax and clergy-specific payroll issues
• Can automate housing allowance tracking
• Offers tax reporting support

https://www.ministryworks.com/

2. QuickBooks Payroll

• Can be customized to track SECA tax for ministers
• Allows housing allowances to be excluded from taxable wages
• Integrates well with QuickBooks for church bookkeeping
• Good for small-to-medium churches

https://quickbooks.intuit.com/payroll/

3. Gusto

• Supports church payroll & tax withholdings
• Can be set up for clergy housing allowance & SECA exemptions
• Automates payroll taxes & filings (except SECA, which still needs to be reported separately)
• User-friendly & great for small ministries

https://gusto.com/

Well again, I don’t recommend that churches register for 501(c)(3) status unless absolutely necessary.

Churches are already tax-exempt by default under Section 508(c)(1)(A) of the U.S. tax code. Registration can open the door for more IRS oversight into church operations and policies—something our founding fathers never intended.

Also, registration does not affect the deductibility of tithes and donations. Contributions to a church are already tax-deductible under existing law.

Yes, I would recommend showing the church as the official entity that owns its assets. That’s the best practice for any nonprofit religious organization.