Tax Treatment for Minister/Clergy

[Kaz]

How do we process W-2 for a minister/clergy? Is there anything different from employee W-2?

I had a client who received W-2 from his employer, and the W-2 had all the numbers except box 2 withholding, which he ended up owing. I learned the self-employed treatment for their other services, but is there anything I should do for his W-2? They are not tax-exempt, right? Please advise.

Thank you.

[snowshine]

Is there a housing allowence? (Subject to SE but not regular tax)
Have you prepared a clergy statement? (This will prorate expenses between Sch-A and Sch-C income)
Is there anything else we need to know?
Most major denominations give tax booklets to their clergy to help them understand the tax system and the clergy's special place within it. See if your client has one of those (I'm looking at last year's United methodist booklet as I type -- very impressive!)

[MAMalody]

How do we process W-2 for a minister/clergy? Is there anything different from employee W-2?

I had a client who received W-2 from his employer, and the W-2 had all the numbers except box 2 withholding, which he ended up owing. I learned the self-employed treatment for their other services, but is there anything I should do for his W-2? They are not tax-exempt, right? Please advise.

Thank you.

In reference to the W-2, generally a minister is considered dual-status. That means he is an employee for income tax purposes and self-employed for Social Security/Medicare purposes. That means that the only boxes filled in on the W-2 would be box 1, box 12 (if there is a retirement plan, etc, box 14 (if you want to enter his housing allowance here).

You may have an entry in box 2 for federal tax withheld if the church withholds. The church is not required to hold, but, if requested can do so if they desire.

[Burke]

How do we process W-2 for a minister/clergy? Is there anything different from employee W-2?

I had a client who received W-2 from his employer, and the W-2 had all the numbers except box 2 withholding, which he ended up owing. I learned the self-employed treatment for their other services, but is there anything I should do for his W-2? They are not tax-exempt, right? Please advise.
Thank you.

The tax treatment of ministers/clergy can get quite complicated. My software has 4 worksheets for the treatment of different items. Need to review Pub 517 and FAQs on IRS website to start.

[Marie]

Clergy payroll

I entered the wages in box 1 with nothing for SS or Medicare. Then I put the housing allowance in box 14--which is not taxable.

Question:

On W-2 and W-3, what boxes do you check?

Kind of payer?

Kind of employer?

Do you need to file a 941 and/or 940?

Only have the pastor with earnings.

Thanks,

Marie

[veritas]

See pages

14-6 & 7 in TTB.

[dan doshan]

Ashamed to admit I try to avoid clergy returns like the plague. Had one or two in 10 years or so and hope I never get another.

[JohnH]

They aren't very complicated once you learn the rules. Certainly less risky than most EITC situations. But I advise anyone who doesn't understand them to do exactly what you are doing. I've had to straighten out a lot of real messes for clergy when the prior preparer just sort of "winged it".

[Burke]

I entered the wages in box 1 with nothing for SS or Medicare. Then I put the housing allowance in box 14--which is not taxable.

Question:
On W-2 and W-3, what boxes do you check?
Kind of payer?
Kind of employer?
Do you need to file a 941 and/or 940?
Only have the pastor with earnings.
Thanks,
Marie

1. You can check 501c non-govt.
2. Since nothing else applies, check 941.
3. You do not need to file 941 if there are no income taxes and/or soc sec taxes withheld.
If there are, you do. Churches are not subject to FUTA (940).

[dan doshan]

entered the wages in box 1 with nothing for SS or Medicare. Then I put the housing allowance in box 14--which is not taxable

A portion of the housing allowance may or may not be taxable. Believe that amount will be determined at 1040 tax time.

[MAJ]

Now I lay me down to sleep....

So what I am hearing here is that we need an idiots guide to the clergy.
While I do not have any clergy clients I sure would like to be sure I understand the process.

Section 1:
What questions should be asked?
Housing allowances, additional income from services, etc


Section 2:
What information goes where on what form?

Let's put together a fictitious clergy member and run some scenarios...
A learning session so to speak..

[MAMalody]

Burke has it right. While I do not know all the answers my entire clientele is made up of clergy and religious works. I would be happy to try to answer any question you might have. You can contact me directly at ClergyTaxes@aol.com. Be advised if you do contact me directly you will loose the benefit of peer review that this board gives.