How to Voluntary Hold taxes for clergy

[jerryrus]

Hello!
Our two pastors want to voluntary hold a set amount for Fed/State taxes. Am I able to do this while still allowing them to take a housing allowance none taxed?
If you have any good resources please let me know!
Thanks!
Jerry

[NeilZ]

Hello!
Our two pastors want to voluntary hold a set amount for Fed/State taxes. Am I able to do this while still allowing them to take a housing allowance none taxed?
If you have any good resources please let me know!
Thanks!
Jerry

Yes, and Yes.

Setting this up is much easier if you use the Federal and State tax tables within Powerchurch. You can set this up in the Maintain List of Employees function on the Pay Items tab. Add the Fed & State tables you use for other employees (I use the SINGLE rate tables for both with ZERO exemptions). The system will then figure out the tax on their salaries. If they want more than that taken out, just subtract what the current tax is calculated by the system from the amount they want taken out. Add the result on the Tax Pay Item as Additional Withholding. I would NOT setup any Social Security or Medicare tax withholding pay items, as ministers pay Federal SECA (self-employment tax), and the amount they wish to withhold under the FITW should cover those payments also.

As far as Housing Allowance, some states tax housing allowance, some don't.

If you state doesn't, all you have to do is make sure that Housing Allowance Item Description (under the Maintain Item Description function of Payroll) is setup as 'Housing Allowance'. Under the Tax Options area of the Item Description, just select Housing Allowance from the list.

HOWEVER .. if you state DOES tax Housing Allowance, as my state of Pennsylvania does, select the More Options item from the list. Check the box next to the Housing Allowance caption that appears. What also appears is a list of all the tax item descriptions you have setup, scroll down until you find your state tax listed, and check the box next to it. The system will then only use the Housing Allowance income for state tax purposes. It will ignore it for the Federal and local taxes.

Obviously, if you have local taxes that tax the Housing Allowance you would want to select that checkbox too so that the Housing Allowance is properly taxed.

Hope this helps.