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The only employee we have besides our pastor is a part-time custodian (or secretary). Do you know of any way we could pay them by contract and save the trouble of withholding income taxes and Social Security/Medicare (FICA) taxes?

In one form or another, this question has been asked literally hundreds of times in financial seminars, correspondence, and telephone conversations. The questions come as a response to the increasing responsibilities of churches and other employers for reporting employee compensation information to the IRS. Fortunately, the answer is fairly straightforward. Not unless they qualify under IRS code which is unlikely unless they perform similar duties for multiple organizations. For a more detailed explanation see Memo #2 - Church Employees or Independent Contractors?