housing allowance

[FRAZZLED]

Church hired extra preacher for 2 months to help out regular preacher. They paid him housing allowance only. Is this reportable and if so how?

[spanel]

Church hired extra preacher for 2 months to help out regular preacher. They paid him housing allowance only. Is this reportable and if so how?

Assuming thats what it was suppose to be and not wages/1099 income... I'm not 100% sure they can do that for a part time pastor.

Goes on a W2 Line 14.

Chris

[FRAZZLED]

houseing allowance

No wages were given only housing allowance. Does it even have to be reported since it is not taxable?

[rtsietsema]

SE taxes

Wouldn’t the income need to reported since a housing allowance is subject to SE tax? Also don’t some calculations for State returns and credits need to account for all income, taxable or not?

[Bonnie]

Yes, must be reported because W2 was issued. And it is subject to SE tax

[Lion]

The pastor's wages are reportable income. He can exclude from taxable income the lesser of the housing allowance as voted on by the governing body of his church prior to paying him, his actual housing expenses for those couple of months, or the fair rental value of his housing for those couple months. The exclusion is not for SE tax, however. Fill out the various clergy worksheets in your tax software.

[Burke]

No wages were given only housing allowance. Does it even have to be reported since it is not taxable?

Lion is correct. It may not be subject to income tax, but it is certainly subject to SE tax. The taxpayer must complete Form 1040 and Schedule SE. A W-2 should have been issued, with the amount shown in Box 14 as Housing Allowance. Then the amount allowable is the lesser of the three items she mentioned. If his actual housing expenses were less than what he was paid, or FRV plus utilities was less than the amount paid, the difference is treated as wage income on Line 1 of the 1040, with the notation "Excess Housing Allowance."

[FRAZZLED]

houseing allowance

Thank You for all the input. Was not sure if w2 could be issued without wages.

[Burke]

I have read where the IRS would look askance at the entire amount paid as a designated housing allowance on a W-2 if pastor provides services to a church. I know it can be done for a retired clergyperson who does not provide services.

[MAMalody]

The allowance is not required to be reported via W-2. In fact, some software will not transmit a W-2 with no entry in box 1. A letter from the church should be sufficient for documentation of the housing income, along with a copy of the documentation indicating the amount he was going to be paid as housing allowance.

[taxmanken]

hint on preparing W-2

The allowance is not required to be reported via W-2. In fact, some software will not transmit a W-2 with no entry in box 1. A letter from the church should be sufficient for documentation of the housing income, along with a copy of the documentation indicating the amount he was going to be paid as housing allowance.

Our firm processes payroll for about 100 churches. If the entire clergy compensation is designated for housing we reduce the housing by at least $1 so block 1 of the W-2 shows a positive figure. If block 1 is left empty our payroll software won't recognize the W-2 even if there is a positive number for state and local wages and housing in block 14. Block 14, by the way is not scanned by the IRS.

[MAMalody]

So, taxmanken, you are, in essence, filing incorrect W-2s. As a pastor, I would not like that.