How to enter Social Security benefit for Pastor

[Blessed]

I am using version 11.5. Our church pays a portion of the Pastor's social security as a benefit. Usually at the end of the year I have to adjust the W2 to show the benefit amount. Is there a better way to set this up so that the 941 and W2 flow without needing to be adjusted? I've tried adding it but it shows as income. Would appreciate any help. Thanks

[NeilZ]

I am using version 11.5. Our church pays a portion of the Pastor's social security as a benefit. Usually at the end of the year I have to adjust the W2 to show the benefit amount. Is there a better way to set this up so that the 941 and W2 flow without needing to be adjusted? I've tried adding it but it shows as income. Would appreciate any help. Thanks

Um ... it IS income. Under IRS rules, if the church pays anything toward the Social Security portion of a Pastor's self-employment taxes, it is a taxable benefit. Unless the minister has applied for exemption from SECA tax, this amount must be included as income.

Amounts included in gross income.
To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income:

1. Salaries and fees for your ministerial services,
2.Offerings you receive for marriages, baptisms, funerals, masses, etc.,
3. The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience,
4. The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allow-
ance (including an amount for payment of utilities) paid to you, and
5.Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. This amount
is also subject to income tax

IRS Pub 517, page 7

[Blessed]

Thank you for your response. I had to get clarification on what is actually being done. This is what I found out: The pastor's salary includes the SS offset as a benefit. However it is not divided in Powerchurch as salary and SS offset to equal the total. I would like to show them separately. The offset amount is being sent monthly with the 941 payment. I am trying to set this up so that the software can keep the running total of what is withheld for Federal and SS benefit. I hope that I'm not making the question more confusing. I'm just trying to get the information in the right format in Powerchurch. Would appreciate any help with this one. Example: the salary is $500; the ss offset is $50

[NeilZ]

Thank you for your response. I had to get clarification on what is actually being done. This is what I found out: The pastor's salary includes the SS offset as a benefit. However it is not divided in Powerchurch as salary and SS offset to equal the total. I would like to show them separately. The offset amount is being sent monthly with the 941 payment. I am trying to set this up so that the software can keep the running total of what is withheld for Federal and SS benefit. I hope that I'm not making the question more confusing. I'm just trying to get the information in the right format in Powerchurch. Would appreciate any help with this one. Example: the salary is $500; the ss offset is $50

I see what you're trying to do.

The pastor gets a $50.00 in Social Security offset which he uses when he files the Self-Employment Tax (which is basically Social Security), it IS income and should be reflected as income. You then add the $50 as an additional withholding amount for Income Tax. This is basically what we do (my wife is the pastor), so we don't have to worry about maintaining a separate personal fund to hold that money until tax time. Basically the IRS becomes a piggy bank for us.

So. you should have the following Pay Items setup:

Item Number:
1. Pastor Salary - Item Type of Income - $500.00
2. SS Contribution - Item Type of Income - $50.00

900. Federal Withholding -Item Type of Tax Deduction - Uses the Federal Tax Table (either single or married as setup in PCPlus) with an additional withholding of $50.00.

Does this help ??

[Blessed]

Yes! This helps tremendously. Would I use the same expense account as I use for the regular salary? item 1 SP salary Income. Also do I need to show a separate line item for the additional w/h amount?

[NeilZ]

Yes! This helps tremendously. Would I use the same expense account as I use for the regular salary? item 1 SP salary Income. Also do I need to show a separate line item for the additional w/h amount?

No, you should be budgeting the Social Security offset as a separate expense line item. As far as the additional withholding, the Item Description for the Federal Income Tax should have a liability account setup. That should already be in place, you should be using it now for the FITW.

The Employee Pay Item just allows you to add the additional withholding. It all goes in the same liability acccount, you don't have to do anything else.

[Blessed]

Hi Neil,
I'm confused. How do I set up a separate line item for this offset account? I followed your instructions into the initial setup but got stuck at choosing the liability account. I'm not sure how to proceed; I'm thinking that you are referring to an account other than the employer liability account for social security w/h right? (the one that is used for other employee w/h)

[NeilZ]

Hi Neil,
I'm confused. How do I set up a separate line item for this offset account? I followed your instructions into the initial setup but got stuck at choosing the liability account. I'm not sure how to proceed; I'm thinking that you are referring to an account other than the employer liability account for social security w/h right? (the one that is used for other employee w/h)

What you're doing is creating an Item Description for a taxable item. That is incorrect.

The Social Security offset is an EXPENSE, it should have a EXPENSE line item in the budget much like that for the Minister's salary.

What you should be creating for the SS Offset is an INCOME Item Description. It should be setup like this (note the tax options, it is a taxable benefit for Income Tax Withholding Purposes):



It is referencing the Expense Account for the Pastor's Social Security line item.

Then you add it to the minister's pay items list under Maintain List of Employees. Open the Maintain List function, head to the minister's record, then his Pay Items tab.

Click the ADD button. The next screen will be the Select Item screen. Under INCOME the SS Offset Item Description should now be listed. Select that and click the NEXT button. The next screen will ask you about the RATE TYPE. Select Salary as this is always a fixed amount. Then enter the amount of Social Security offset that is added to the paycheck. This is PER PAY PERIOD. If the minister is paid twice a month, then the amount would be 1/2 of the monthly, and so on. When you finish this, click the FINISH button.

And here's what it looks like in the minister's pay items list under Maintain List of Employees



And here's what it should look like if you click that line to edit:



Finally, you can add the amount of Social Security Offset after Federal Taxes are determined by entering that amount to the additional withholding. What we did was just figure what the FITW would be on the SS Offset of 145.31, deducted that from the offset amount, and entered it here.




Does this help ??