COA Question

[onemore4gsus]

Currently, our COA combines in a single account both the Lead Pastor's housing and his salary. I keep a payroll Excel sheet on the side, where it's broken out. In addition, there are separate Item Descriptions for his salary and his housing in PC+ Payroll.

When the original COA was set up, the CPA combined salary and housing in the same line item.

I plan to break out Housing into a new account line (new Detail under Group). Are there any caveats for me to take note of before I make the following change the Chart of Accounts in 2017, besides making sure the Item Description account associations are changed?

[NeilZ]

Currently, our COA combines in a single account both the Lead Pastor's housing and his salary. I keep a payroll Excel sheet on the side, where it's broken out. In addition, there are separate Item Descriptions for his salary and his housing in PC+ Payroll.

When the original COA was set up, the CPA combined salary and housing in the same line item.

I plan to break out Housing into a new account line (new Detail under Group). Are there any caveats for me to take note of before I make the following change the Chart of Accounts in 2017, besides making sure the Item Description account associations are changed?

The Chart of Accounts is a no-brainer. Its an expense to the church, period.

The issue is setting up the pay item descriptions for Housing Allowance. Housing Allowance is not taxable for Income Tax, however, it is taxable for SECA (Self-Employment Tax).

Additionally, some states (and localities) will tax the Housing Allowance (if not a manse/parsonage) which makes the Item Description setup a bit tricky.

Setup is as follows:
a) States that do not tax housing allowances:
This is very easy, set up the item as INCOME, with a Tax Option of Housing Allowance. Point the item to the new expense account.

b) States that tax housing allowances:
Set up the item as INCOME and point the item to the new expense account. Here's where it gets different. For Tax Options, tax options from the pull down. Two new checkboxes will appear next to the pulldown. Check the box next to Housing Allowance. Then in the area labeled This income is taxable by what types of taxes check the checkbox next to your state income tax and (if required) your local tax.

In both cases, the system will record the housing allowance in box 14, and label it House Allow:, on the W-2. In case 'b', the Housing Allowance will be added to the state wage total, and the local wage total. Taxes will also be withheld at the state and local rate.

Hope this helps.

[onemore4gsus]

Thank you, Neil. I have other minister EEs set up for housing in a separate account and item description, so I'll double check their settings according to your advice and follow it for the new set up.

So are there any other consequences I might not foresee when changing an item description's expense account association?

(State of VA does not tax housing allowance.)

[NeilZ]

Thank you, Neil. I have other minister EEs set up for housing in a separate account and item description, so I'll double check their settings according to your advice and follow it for the new set up.

So are there any other consequences I might not foresee when changing an item description's expense account association?

(State of VA does not tax housing allowance.)

Nope ... not at all.

That is good to hear about VA, then just use the Setup 'A' as I mentioned above.