1099 Question

[bachristo]

I have a 2 part question.

1). I spoke with our church tax advisor and he said that we should keep the Pastor as a 1099 employee instead of a W-2 employee. My question is this: Should I set him up in the Payroll module, or hould I set him up as a vendor in the AP module? If I set him up in the Payroll module, would I just have to manually make a 1099 for him?

2). My pastor wants us to withold his taxes for him so that he does not have to deal with it himself. If we start doing this would I just set him up as a regular W-2 employee?

Thanks,
BC

[Randy B]

Publication 15-A of the IRS which can be obtained from www.irs.gov instructs on page 9 that wages of ministers are to reported on a W-2. You should also consult publication 517 for a comprehensive example of a minister. You could also consult your local IRS office. Instructions for preparing forms W-2 and W-3 can also be found on the IRS website.

Ministers are allowed to file as self-employed and pay a SECA tax. Then they pay their income taxes with quarterly estimates generally. Publication 517 explains this. You can however withhold federal income tax for a minister and report this on the W-2.

[Randy B]

There is no such thing as a 1099 employee. If the minister is an employee then you issue a W-2. You do however issue a 1099 to visiting ministers if you pay them $600 or more in a calendar year. Visiting ministers are not employees. I wanted to clarify there could be a situation when you issue a 1099 to a minister but that minister is not an employee.

[genesisuser]

We have a part-time custodian, which according to IRS rules is NOT considered an employee of the church and should be issued a 1099-MISC. Back to the original post, will I have to do a manual 1099-MISC if this person is set up in the Payroll module? We are using PC+ 8.5.

Thanks.

[genesisuser]

Okay, I found the information I needed in the A/P module. However, we didn't use A/P for this situation in 2004, but set up the custodian in the Payroll module.

Any ideas for 2004? - Manual 1099 or should I reverse the payroll 2004 for this person and create a dummy A/P entry. I haven't closed out 2004 in PC+, so could I do the following:

- Post payroll reversal to fund accounting
- Post A/P to fund accounting

So, over the course of the year, if the custodian was paid $2400, I would post -$2400 to Payroll and fund accounting, and post $2400 to A/P and fund accounting. The expense account would not change.

Thanks.