Got a new client that is a pastor in a small church. The pastor's W2 shows around $13k in box 1 and $15k for housing allowance. The pastor told me that he tithed $7k and has a statement from his church documenting this amount. I thought the amount of tithes seemed excessive based on the W2 and asked him about it. He told me that the church holds out his tithe from his salary. As a result, the W2 box 1 amount is the gross earnings less the tithe amount. I'm certainly not an expert in clergy taxes but this doesn't seem reasonable (or legal) to me. I'm I missing some obscure tax law that allows clergy to deduct tithes pre-tax?
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Page 14 on the above link discusses this... -
No, this is not "legal." Charitable contributions, if deducted from a salary, should be on an after-tax basis. Then he can deduct on Schedule A if he can itemize. So the full amount of salary goes in Box 1. They may or may not withhold any taxes.Last edited by Burke; 03-16-2015, 05:54 PM.Comment
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I'd just add the $7K to his W-2 earnings, reporting $20K on line 7 and then proceed as normal.
Chances are the W-2 Copy A wasn't sent in to IRS anyhow, and even if it was, as long as his Line 7 entry exceeds the W-2 amount, IRS won't really care.
There are a couple of reasons line 7 can be higher that the W-2 totals, even under normal circumstances."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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True, but I won't do anything material on a return without client consent - that's implied in any of my posts."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Sorry if post came across as offensive. That was not the intent.Comment
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No offense taken - just thought I'd clarify my shorthand."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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