User Support Forum

This is my first year to print W-2 forms and I need some help! Can you please let me know what reports I need to run and how I go about subtracting the housing allowance and if I put that on the W-2 form somewhere? Thanks!

You do not show the housing allowance on the W-2. The minister includes this on Schedule SE. You can but are not required to show that in box 14 which is an informational box. This is covered in the IRS W-2 instructions which is available on the IRS website.

I have a question in this area as well. I have had a housing allowance for the pastor ever since I have been treasurer, but he does not have FICA or Medicare withheld so it has not been a problem on his W-2. But this coming year we have added 2 pastors to the housing allowance and they both have FICA and Medicare withheld. Isn't the housing allowance subject to the deductions? And if so how would they be reported on the W-2?

One thing to keep in mind is that the housing allowance can only be one half of the person's compensation package, if I understand this correctly. So, one most of our pastoral staff, half is housing, half is salary, and any deductions they want are from the salary half. We have one individual who is both a Music minister and a secretary. Her music minister compensation is all housing allowance--that is because she also makes enough from the church under her secretarial wages that she is eligible for all the ministerial package as housing allowance; both roll up together on her W-2.

Anyway, maybe one of the CPA's will correct me on this. But this is how I think it is.

Generally to be a minister for federal income tax purposes you have to be ordained, commissioned or licensed. You can not just give someone a title as minister and have them qualify as a minister for federal income tax purposes. IRS publication 517 should be consulted.

After I quick review of IRS publications 1828 and 517, I do not see where the housing allowance is limited to one-half of income. Housing allowances though according to Publication 517 are for ordained or licensed ministers only. This is not available for pastoral staff. There is a procedure that must be followed for designating the housing allowance.

As far as for tborgal's question, I am not sure you can withhold SECA taxes from the housing allowance. If this was the only employee, you would be submitting taxes on no reportable income. This would be a source of continuing confustion for the IRS I would think. I would recommend you contact the IRS if you question is the ordained or commissioned minister wishes to have SECA tax withheld but still file a form SE

Part of the problem is that these employees have just qualified for housing allowance this year. They are existing employees that have SECA taxes withheld previously. After a little research of my own I have discovered that ordained, licensed or commisioned ministers are "ALWAYS" considered self-employed by the IRS. This means I will have to change the way I pay them in the future. I haven't worked out all the details of this yet and am not sure of what changes will be needed in their deductions since their first pay cycle of the year included these deductions. However I think if I get this figured out before I have to File the first quarter 941 I should be OK.