Housing Allowance Error

[RLM]

We recently hired a new pastor who prefers to be treated in payroll as a salaried employee as opposed to a dual-status minister. This is in contrast to our former pastor who wanted to be considered a dual-status minister and qualified under IRS regulations to receive a 'housing allowance' which was not taxable.

I mistakenly did not withhold payroll taxes from $.00 for the first six pay periods because I had categorized that amount as non-taxable 'housing allowance'. After realizing the error I need to generate the 'make-up' taxes that were not withheld on those six payroll checks.

Here is what I want to do, but I need some help from this support group in setting up the correct MISC. DEDUCTION account.

I intend to add $.00 into the next six week payroll checks (which has now been set to taxable) in addition to his current package. Then I want to treat $.00 as a payroll advance so that it all washes out and pastor's payroll doesn't take the 'big hit' all at once.

[wms7328]

it appears that no one has responded to your question. If I read your message correctly, you essentially want to pay the taxes that should have been withheld from the previous checks for your minister. Basically you are increasing his compensation for the year by the amount of the taxes that should have been withheld.

If you do intend for the minister to pay these back taxes, then you will need to deduct them from his pay. I would suggest you pay the total amount not withheld previously with next tax payment. You may want to check with tax expert to see if it's acceptable to spread the tax deductions from your minister's pay across a few months so your minister doesn't see the total missed taxes deducted all in one month.

Don't know if this answers your question.