User Support Forum

I have been directed to issue separate paychecks to the Minister each month -- one for salary & one for the housing allowance. Is there an easy way to do this so that I don't have to manually adjust every check for the Minister?

Thanks for any help you can provide.

John:
Other than using two separate pay periods, and you'll still have to change the amounts of each line (one to zero and the other to the amount to be paid), I don't think there any other way to do it.

The housing really needs to be paid as a payroll item, other than doing a 'vendor' type payment from accounts payable.

I'm not really certain the rationale your people have used to tell you to do two separate checks...there aren't any IRS related reasons to doing so that I can think of. (I'm an ordained minister myself, and there's no advantage from my understanding of the tax laws, nor does my tax accountant).

Hope that helps.

If your minister has not exempted himself from Social Security and you issue him a W2 at the end of the year the only way is to manually adjust each check. The housing allowance is SS income and must be reported as such on his W2.
I suppose you could set up a second employee for the housing allowance, but you would then have to issue a second W2 and I don't know what the IRS rules are for something like this. I would check with your accountant or a tax Lawyer before I made this change.

Even if an ordained minister has not opted out of Social Security, Housing Allowance should only be reported in box 14 of the W-2 with the amount listed and description of "Parsonage Allowance" or "Housing Allowance. The housing allowance should never be reported in box 1. A great resource is Worth's Income Tax Guide for Ministers by B.J. Worth 574-269-2121.

As far as issuing a separate check...no problem. Just set it up as a separate item in the Maintain Employee Pay Items for the minister and process the check. You could set up the minister with a paycheck group code of H and process only employees with "H" which will only bring up employees with that code. Change everything to "process no" except for his housing...after printing the housing allowance check, you'll need to change every item back to "process yes" and housing allowance to "process no". This is really a lot of extra work and not necessary. We pay our minister's housing allowance monthly and just include it with his regular weekly check. I mark it process no for weeks that he does not receive housing allowance.

Thank you for all the replies. Wellspring's recommendation is along the same lines of what I've done. We pay the minister's salary and housing allowance monthly, but we also have a lot of deductions that come out of the salary -- some pretax, some post-tax. We have also been asked to withhold, which I do. I created a separate line item for self-employment tax, where I put in the correct monthly amount based on the combined salary and housing allowance. This accrues to federal withholding (along with federal income tax withholding) for the minister.

The one thing that is different: Since housing allowance is the only item to show up on the separate check, my default set up is with it not to be processed. In order to process the housing check, I issue a "manual" check: I set the housing allowance to be processed (Y), and I delete all the other lines. This is quicker than changing all the other items to not process (N), and once I issue the housing allowance check this way, I have not changed the defaults for the next minister payroll check.

As to why we are issuing a separate check for the housing allowance: Apparently, our parent association had recommended separate checks as a means to help keep people from being confused about the housing allowance total. But, of course, the ministerial contract, paycheck itemization, and W-2 statement would all make this quite clear as long as the bookkeeping is correct. I plan to ask the Minister and Board to amend the ministerial contract so that we can change this to one monthly paycheck that includes the housing allowance, for the sake of clarity for future bookkeepers and treasurers at our church.