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Pastors have to report their income as employees because they are considered as employees according to the IRS. Even for the pastors this is a good option because of the value of various fringe benefits can be excluded from taxable income; for example health insurance premiums paid by the employer. In addition, the risk of an IRS audit decreases substantially if you report your returns as an employee; and this way of reporting also helps the pastors to avoid additional taxes and penalties that self-employed people have to pay.
If a pastor files tax returns as a self-employed clergy, the chances of him getting audited by the IRS increases, and this will eventually lead the IRS to reclassify him as an employee.
However, in reality most pastors in the US have dual tax status. When it comes to federal income tax reporting, pastors are considered as employees whilst for social security purposes, they are self-employed. This means that pastors do not have to pay FICA taxes even though they use the W-2 form to report their returns. Instead, pastors have to pay a self-employment tax.
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