Pastor SECA withholding

[Lolbkpr]

Hello, we have a new pastor who is asking if we can withhold their income taxes and pay them to the IRS. I have never done this before. How would I estimate this amount? Is there a percentage? And would I then include them and their income on the 941?

[NeilZ]

Hello, we have a new pastor who is asking if we can withhold their income taxes and pay them to the IRS. I have never done this before. How would I estimate this amount? Is there a percentage? And would I then include them and their income on the 941?

Its basically income tax withholding. Set him up for regular Federal income tax, no dependents, and ask how much more he wants to take out of his pay. Then when he or she does the taxes, the amount withheld is used to cover the extra Medicare/SS amounts that SECA covers. You should have a standard Federal Income tax payroll item, so it should work.

Its not rocket science, my wife is a pastor, and we've been doing that for years.

As far as the W-2 and Quarterly 941, its all federal taxes, and the program will include the amount, and total it with the federal withholding, it will NOT show up in Medicare/SS as a Pastor is not an employee. I'm also going to assume that the congregation includes as part of pastor salaray a Social Security offset that covers the employer side of the SS taxes for the pastor. I would include that amount as part of the withholding too.

[Lolbkpr]

Thank you.
When you say to take the Social Security offset and withhold it - that is part of their Defined Compensation in our budget so I don't know how that would look - would we be removing that from their Defined Compensation? Or adding it on to their withholding as an additional amount?

[NeilZ]

Thank you.
When you say to take the Social Security offset and withhold it - that is part of their Defined Compensation in our budget so I don't know how that would look - would we be removing that from their Defined Compensation? Or adding it on to their withholding as an additional amount?

You would not be removing anything, they get that paid to them in the monthly check (or should be), however, that amount should be then withheld so that it would be available to pay the SECA taxes when the pastor files.

Of course, this would be with the consent of the pastor. He or she may not want that money withheld, but would prefer to bank that. It depends on them.

We had it withheld under the rule, you don't see it, you don't spend it

However, if the SS Offset is paid in a lump sum at the end of the year, then this would not apply.

[Lolbkpr]

Hi,
Just to confirm as I'm doing the Q3 941... on line #2 "Wages, Tips, other Compensation", we do include the pastor salary in this line? We used to subtract out Pastor's salary since we didn't withhold Federal from it.

[NeilZ]

Hi,
Just to confirm as I'm doing the Q3 941... on line #2 "Wages, Tips, other Compensation", we do include the pastor salary in this line? We used to subtract out Pastor's salary since we didn't withhold Federal from it.

Yes, you have to report all wages and withholding on the 941. FWIW ... if you have Powerchurch doing the 941, you shouldn't have had to subtract the pastor's salary previously, as it would not have been included in the first place.

[Lolbkpr]

OK, the line 2 on the 941 is a bit less than the total on the Wage/Hour report for Q3. Under "Tax Options" in the item description, the Pastor Salary is marked as "Clergy Salary", Housing Allowance is marked as "Housing Allowance", and Social Security offset is marked as "Taxable".
What part is not included on the Line 2?
It's almost as if there is some of the pastor's items on the Line 2, but not all.

[NeilZ]

OK, the line 2 on the 941 is a bit less than the total on the Wage/Hour report for Q3. Under "Tax Options" in the item description, the Pastor Salary is marked as "Clergy Salary", Housing Allowance is marked as "Housing Allowance", and Social Security offset is marked as "Taxable".
What part is not included on the Line 2?
It's almost as if there is some of the pastor's items on the Line 2, but not all.

The Housing Allowance is not included, and should not be included under Income Tax, it is taxable under SECA, but its not reported as income to the IRS, but is added on the W2 in box 14 separately.