Church w2

[rwm221]

I have a client who is a church administrator. He received a w2 with $30,000 in box 1 and nothing else on the form. Should they have given him a 1099 nec?

[terryats]

Sounds like the church is treating him as a minister, and he would have to pay SE tax on the $30000. You should ask the Church, or maybe your client knows. you should also check if he gets a housing allowance

[Uncle Sam]

I would suggest you first read the contract between the Church and the Administrator to determine if all the significant tests are met to clearly determine employee vs independent contractor status.
Only a clergyman would be eligible (if circumstances based on the contract) for the no Social Security tax matter, not an administrator. Depending on the tax software involved, there may be a checkbox on the W-2 input screen that would show a clergyman W-2 income not subject to Soc. Sec. tax because of it properly shown on Schedule C.

[rwm221]

Since he is being treated as a clergy even though he is an administrator subject to ss med tax can he use deductions like a sch c

[Uncle Sam]

To my knowledge, the only deduction he is entitled to (in the Cost of Goods Sold section) is Parsonage allowance) if permitted in his circumstance, but you will need to add that amount into the calculation for Social Security tax.

[DoubleO]

To my knowledge, the only deduction he is entitled to (in the Cost of Goods Sold section) is Parsonage allowance) if permitted in his circumstance, but you will need to add that amount into the calculation for Social Security tax.

Nooo! A Parsonage allowance would NEVER be a COGS deduction. The parsonage/housing allowance is an exclusion for income tax purposes, not a deduction, and at most, would only be reflected in W2 box 14 as an information item. It is subject to SE tax, however. A church would not withhold or match SS/MC on a true pastor position.

In this particular instance, I’m wondering if the church itself applied for the separate FICA exemption which would mean it is not required to withhold or match Ss/MC on its other nonpastoral employees. If so, the administrator would be responsible for his own FICA payments. A minister, however, pays SECA on both his wages and housing allowances.

I have seen very few churches who qualify for this exemption.

And to the other post, if this admin is getting a W2, why would anything be deducted on a Schedule C? Not even pastors file a Schedule C unless they have other payments for ministerial services not earned as an employee. (Or of course, other unrelated businesses). Even then, the Deason allocation rule applies to all ministerial income/expenses.

[DoubleO]

If the church elected the FICA exemption, a W2 would still be appropriate for all employees.

[DoubleO]

To clarify/correct: Tried to edit, but could not.

If the church applied to be exempt from the employer’s share of FICA on nonpastoral employees, the nonpastoral employee would pay his own SECA. The rules for lay employees of a church that filed an 8274 are somewhat different than for a pastor employee. W2 would be appropriate, but no SS/MC withholding or matching.

It is important to ask whether the employee meets the definition of a pastoral employee when encountering these W2s. An admin usually would not unless he has other pastoral duties ad part of his job. He would need to be ordained/licensed/ commissioned to be treated as a pastoral employee.

[Bonnie]

The church is obviously treating him as a minister and issued the w2 as any minister. Income goes on return as a w2 and you fill out the SE for clergy and he pays the FICA for both wages and housing if there is any housing. Housing allowance is not included in wages on line 1a of the 1040. No Sch C for this return

[DoubleO]

The church is obviously treating him as a minister and issued the w2 as any minister. Income goes on return as a w2 and you fill out the SE for clergy and he pays the FICA for both wages and housing if there is any housing. Housing allowance is not included in wages on line 1a of the 1040. No Sch C for this return

How do you know they are obviously treating him as a minister and not preparing the W2s under an election made to be exempt from FICA on the 8274?

Most admin positions are not licensed/commissioned/ordained, so I would definitely ask questions before assuming. Now if they also designated a housing allowance, that is a sign the church does consider the employee is in a pastoral position.

You also have to consider that many churches do not know how to properly account for payroll for either their pastoral employees or their lay employees.

[DoubleO]

You are correct that the clergy worksheets should be used and attached to the return if indeed in a pastoral position.