Pastor receives W-2. He and wife make under $52K combined. Box 12 on W-2 is empty. On W-2 stub, there is "other - cafe 125 contribution" of 1820 that is pre-tax and is his "401k" (according to him). Why isn't this amount in Box 12 as a retirement contribution? Should it be? Does it qualify them for the savers credit?
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Not unless it is really a 401(k). Maybe he doesn't know what a 401(k) is. Both are exempt from income tax. Sect 125 cafeteria benefits are usually exempt from SS tax. So boxes 1 and 3 should be the same on the W2.. 401k contributions are subject to SS tax. So box 3 is more than box 1 by the amount of the 401k. What does his show?Originally posted by MelanieCPA View Post -
I would say that if this is a pastor, his church probably has no idea what they are doing. I realize that is a generalization, but...Originally posted by Burke View Post
Second, if this is a pastor boxes 3, 4, 5, 6 should be left blank on the W-2. There are exceptions, but, fairly rare.
Third, if it is just listed in the wrong box on the W-2 and would otherwise be used for the savers credit, you can still use it for that. Potentially, since it is unsupported by a W-2 entry, it could raise questions by the IRS. From a practical point, I have not seen a question yet and have done this on a number of returns over the last two or three years.
Fourth, to ensure the pastor knows what he is getting, ask for a copy of the minutes that established his compensation package. This will not only confirm the figure, but also his housing allowance.
Fifth, you can always ask to have the W-2 corrected to the proper format once you know what it is. I have had to do this three times so far this filing season.
MikeComment
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W-2 says...
You are correct, Mike, in that boxes 3 - 6 are empty. Since the contribution is not subject to SS, Box 3, does that mean that it does not qualify for the savers credit?? I gathered that from the first post, or do I still need to ask more questions?Comment
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Has the pastor or his parish, elected not to be subject to Social Security?Originally posted by MelanieCPA View Post
Or is this a Mennonite pastor? And not subject to Social Security.
See page 15 of IRS Pub 1828 Tax Guide For Churches and Religious Organizations
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As far as I know, it would still be eligible for the Savers Credit.Originally posted by MelanieCPA View Post
MikeComment
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For a dual-status pastor, boxes 3-6 not being filled out on a W-2 is not relevant to whether they are part of the SS system or not. They are to be treated as self-employed per IRC 1402(a)(8) for social security reporting, therefore, you cannot fill out boxes 3-6 of the W-2. Unless they have an approved Form 4361 they are subject to the SE tax on clergy income and housing allowance.Originally posted by gkaiseril View Post
MikeComment
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I have done religious returns that contained W-2's (teaching, parish services), Schedule C (weddings, christenings, and funerals) and Schedule E (royalties) from the clients religious related work. And then you have to deal with a Parsonage allowance or a provided Parsonage and the associated taxes for that perk. There are so many ways that income can be earned and expense items can be handled that one really needs to understand the many factors affecting the pastor and then determining what your specific situation requires.Comment
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There s/b a special W-2 for Clergy
Clergy contributions to 401(k) plans are not subject to SE tax. W-2 income and housing allowance are subject to SE tax and can both be used for the 401(k) limits.
SE tax would not apply if Form 4361 has been timely filed and approved.Comment
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