Almost every church runs into this question sooner or later: is this person an employee, or a contractor? A worship leader filling in "for a season." A youth worker paid a small stipend. A guest speaker who comes once a year. The instinct is often to keep it simple with a 1099 — but that instinct is one of the most common and costly mistakes in church payroll.
The default answer is usually W-2
Most people who do regular, ongoing work for a church — pastors, office staff, worship leaders, childcare workers — are legally employees, not independent contractors, even if the role is part-time or the pay is modest. Misclassifying an employee as a 1099 contractor can trigger back payroll taxes and penalties if the IRS or Department of Labor reviews it later.
Pastors are a unique case
Pastors occupy an unusual dual status: they're generally treated as employees for federal income tax purposes and receive a W-2, but as self-employed for Social Security and Medicare, paying self-employment tax instead of having FICA withheld. A 1099 only applies when a pastor is genuinely working as an outside contractor — for example, preaching as a guest speaker at a church that isn't their employer.
What about volunteers and stipends?
- Pure volunteers generally don't receive a W-2 or 1099 at all.
- Reimbursed expenses (with receipts, under an accountable plan) aren't taxable income and don't require a form.
- Stipends or gifts beyond actual expense reimbursement can cross into taxable territory, and may require a W-2 depending on the nature and regularity of the relationship.
Why this matters
Worker misclassification is one of the more common findings when a church's payroll gets a closer look — often because a "temporary" arrangement quietly became permanent without anyone updating the paperwork. Getting classification right from the start protects both the church and the people doing the work.