minister W2 question - fica allowance

[krav]

I have a minister whose church pays him a salary, housing allowance and they give him an allowance for the 7.65% ER side of FICA. This is the first time I have seen a church give an allowance to the minister for their side of the fica. So my question is - is that allowance subject to SE tax along with everything else? I am thinking it is, but can't find anywhere that says it definitively. Any thoughts?

[spanel]

I have a minister whose church pays him a salary, housing allowance and they give him an allowance for the 7.65% ER side of FICA. This is the first time I have seen a church give an allowance to the minister for their side of the fica. So my question is - is that allowance subject to SE tax along with everything else? I am thinking it is, but can't find anywhere that says it definitively. Any thoughts?

I dont see how it wouldnt be.

I would put the amount designated for housing as such. The rest is Sch C income.

I would also advise them to stop doing that. Either pay him a salary and withhold taxes or dont. Dont try to hide it.

Chris

[Burke]

Actually, this is quite common. They should include the extra amount in Box 1 as wages. Whether he pays SE tax or not depends on his application for exemption to the IRS via 4361. If he is not exempt, he pays SE tax on this amount as well. It is not Schedule C income.

[krav]

Thanks for the reply - it is added to Box 1, which is why I figured it should be subject to SE, but just wanted a second opinion.

[Lion]

And, the housing allowance for tax purposes is the lower of the church's stated housing allowance, housing expenses your client actually spent, and the FRV of his residence. If the church's stated HA is not the lowest, you add back the excess to income.

Churches don't withhold FICA/Medicare, and they don't withhold FIT &/or SIT unless requested by the clergy person.