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Our church does not have any 'employees'. The Pastor get a housing allowance and that is reported on a W2.
Now the church wants to give the pastor a LARGE gift . This will be taxable.

Power Church Version 12 is a sweetheart and I love what it can do, but I am not sure how to handle this one

thanks
Tina

Tina Burlew wrote:Our church does not have any 'employees'. The Pastor get a housing allowance and that is reported on a W2.
Now the church wants to give the pastor a LARGE gift . This will be taxable.

Power Church Version 12 is a sweetheart and I love what it can do, but I am not sure how to handle this one

thanks
Tina

OK .. here's a question. Does the pastor get any taxable salary or benefits other than the housing allowance which is not Federally taxed?

No taxable income - only the housing allowance

Tina Burlew wrote:No taxable income - only the housing allowance

Then I'm assuming that you don't use payroll, and also suspect you do not have any accounts with the IRS or state tax agencies to pay tax deposits, in which case you should just fill in the W2 manually as you do with the housing allowance with the amount of the gift in the taxable amount (Box 1), with zeros in the deductions for Federal and state taxes (boxes 2, 4, 6). The pastor will then need to file his taxes and pay at that time.

Thanks for the info - another part of this question is that does not the church have a tax liability for Medicare and FICA on this 'gift'

I really appreciated your info on this

Tina Burlew wrote:Thanks for the info - another part of this question is that does not the church have a tax liability for Medicare and FICA on this 'gift'

I really appreciated your info on this

Pastors pay SECA tax as they are considered Self-Employed for SS & Medicare. The pastor *should* be paying this on the housing allowance, this is why its listed on a W2 even though there is not a 'salary'.

thanks for your help - your work is appreciated

an additional question - if the pastor has no taxable income and this gift is taxable would it not be easier to set up the gift amount as payroll that would go into Box 1 on the W2 with no tax taken out.
thanks

Tina Burlew wrote:an additional question - if the pastor has no taxable income and this gift is taxable would it not be easier to set up the gift amount as payroll that would go into Box 1 on the W2 with no tax taken out.
thanks

Considering that there are no other employees, and since you didn't reply about using payroll and manually creating a W2, I'm assuming that is what you do, setting up Payroll for what appears to be a once or twice a year bonus doesn't make any sense. Just typing in the amount is a lot easier.

However if you do use payroll to track the housing allowance and have it add the housing allowance to the W2 box 14, then creating an income item for a bonus and manually entering the amount is trivial.