Youth Pastor

[Burke]

So in the example given, where there are wages reported in Box 1 and zero's in box 3 and 5, how does the IRS match the W-2 completed by the church to what is reported on the Pastor's tax return, since he is responsible for paying both portions of the social security and medicare taxes personally?Thanks,,,Duane Anderson

Well, for one thing, Box 3 & 5 are for SSA purposes. The pastor also completes Sche SE to pay those taxes if he/she is required to do so, and they appear on page 2 of the 1040. If some (or all) of the housing allowance is treated as taxable wages and included on Line 7, the words "Excess Hsg Allow" or some such wording will appear on the printed return. The W-2 has a box to check in my software to indicate clergy and this would be transmitted to IRS via efile. So they know either way.

[FEDUKE404]

Looks like a plan!

Well, for one thing, Box 3 & 5 are for SSA purposes. The pastor also completes Sche SE to pay those taxes if he/she is required to do so, and they appear on page 2 of the 1040. If some (or all) of the housing allowance is treated as taxable wages and included on Line 7, the words "Excess Hsg Allow" or some such wording will appear on the printed return. The W-2 has a box to check in my software to indicate clergy and this would be transmitted to IRS via efile. So they know either way.

This process is comparable to what I remember the last time I encountered such a situation.

In the simplest of terms, the "minister" has to prove his innocence so as not to be subject to any income tax on the housing allowance, with the taxable amount more than likely eventually appearing on line 7 as noted.

It is likely a good tax software program can make the search for the truth fairly painless.

FE