Interim Pastor

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whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Interim Pastor

Post by whfpc »

Good morning, PC 12.2 here. We have a new Interim Associate Pastor beginning Monday. His pay is a little different than all others. He is covered by other insurance so in lieu of paying his medical coverage expense the Session agreed to pay him through his current 403b plan. My question is, how do I record that pay? Do I make a new pay code and add it?
Normally we have
Cash Salary $xxxxxx
Housing $xxxxx
Then the Board of Pensions submits a bill monthly which the church pays and charges to the church's set expense fund for that particular charge.
This will be
Cash Salary $xxxx
Housing $xxxx
Deferred Income $xxxx -
I will be sending a set amount each payroll to his current 403b.
I know this will be an expense and will show on line 12a on his w2 and I am assuming I add it to his cash salary?

Robin

NeilZ
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Fri Sep 18, 2020 7:53 am
Good morning, PC 12.2 here. We have a new Interim Associate Pastor beginning Monday. His pay is a little different than all others. He is covered by other insurance so in lieu of paying his medical coverage expense the Session agreed to pay him through his current 403b plan. My question is, how do I record that pay? Do I make a new pay code and add it?
Normally we have
Cash Salary $xxxxxx
Housing $xxxxx
Then the Board of Pensions submits a bill monthly which the church pays and charges to the church's set expense fund for that particular charge.
This will be
Cash Salary $xxxx
Housing $xxxx
Deferred Income $xxxx -
I will be sending a set amount each payroll to his current 403b.
I know this will be an expense and will show on line 12a on his w2 and I am assuming I add it to his cash salary?

Robin
No ... paying to a 403b is a taxable benefit, not salary. You don't want to 'blend' them as they are separate entities for tax requirements. However, I'm kinda confused. I've never heard the BoP sending a bill for 'salary & housing'. What do you mean by that. Also, if the 403b under the BoP payment, or is that a separate payment to a third-party?
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

The Board of Pensions invoices for installed pastors pensions, medical and death and disability, when I received that invoice I pay and then charge the individual accounting fund for the appropriate pastors amount.
The 403 is not with the board directly, 3rd party, it is not actually billed, just something I will pay.

So I need to include his salary and housing only on his w2? I keep thinking I need to show that as income somewhere but then show it as a contribution to the 403b somewhere?

Robin

NeilZ
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Location: Connellsville, PA
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Fri Sep 18, 2020 8:54 am
The Board of Pensions invoices for installed pastors pensions, medical and death and disability, when I received that invoice I pay and then charge the individual accounting fund for the appropriate pastors amount.
The 403 is not with the board directly, 3rd party, it is not actually billed, just something I will pay.

So I need to include his salary and housing only on his w2? I keep thinking I need to show that as income somewhere but then show it as a contribution to the 403b somewhere?

Robin
OK .. that reference to the BoP confused me for a sec. I'm hoping that you have that BoP employer liability setup as a liability account in payroll, but that's a different subject. So about the 403b:

The 403b contribution HAS to show up on the W2, so here's what you do:

1. Create an INCOME Item Description for IAP 403b (interim associate pastor 403b)
2. Fill in the information for item number, description, expense account as normal.
3. For Tax Options select <more options> from the drop down list This will then display a list of the current tax items you have setup, along with the Box 12 drop down. I'm fairly sure you will be selecting item E from the Box 12 list. As far as taxes, you have to check to see if your state or local tax authorities tax 403b contributions or not. Some do, some don't. Just check the boxes for those taxes that apply.

Does this help?
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

Thank you Yes, the BoP is set up as liability :) I appreciate your help! And this forum!

NeilZ
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Joined: Wed Oct 08, 2003 12:20 am
Location: Connellsville, PA
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Fri Sep 18, 2020 10:16 am
Thank you Yes, the BoP is set up as liability :) I appreciate your help! And this forum!
Some advice: I would not use the BoP liability account for this, as this is a completely separate payment.
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

I did not make a liability account for this, should I? I have it set as an income item to the IAP per the instructions, do I need a separate liability as well?

NeilZ
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Joined: Wed Oct 08, 2003 12:20 am
Location: Connellsville, PA
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Fri Sep 18, 2020 12:07 pm
I did not make a liability account for this, should I? I have it set as an income item to the IAP per the instructions, do I need a separate liability as well?
I knew I forgot something. You then have to create a new Item Description for Other Deduction which will then deduct the amount being sent to the 403b. You have to account for the 'giving' and then the 'taking'.

So ... I need to modify step 3 referenced above ... sorry ... my bad.

3. For Tax Options select <more options> from the drop down list This will then display a list of the current tax items you have setup, along with the Box 12 drop down. {b} do not select anything for Box 12, NOR for any other taxes . [/b] This will be taken care of in the next step.

So ..
1. Create a new liability account to hold the 403b liability
2. Create a new Item Description of Other Deduction
3. Fill in the Item Number and description as normal.
4. Use the Liability account created in step 1
5. Tax Options, select the <more options>, you'll get a checkbox that asks should you report on W2 check that box, then select item E from the Box 12 drop down. Note: Don't use the Retirement Deduction selection as it may or may not do your local taxes correctly.
Speaking of txes, you would select them from the <more options> drop down, you have to check to see if your state or local tax authorities tax 403b contributions or not. Some do, some don't. Just check the boxes for those taxes that apply. I'm 'fairly' sure that Federal withholding taxes don't apply for income tax, SS and Medicare; but I'd check that too.
Note: The % Calculation should be greyed out, as you will use the exact amount when you create the pay item.
6. Add the pay item (along with the income item) to the employee's pay item list. Use the exact amount that you're adding to the 403B.

This should take care of everything. What I would do to be sure is to set everything up, and review the amounts for Gross salary, Liability, other deductions, etc on the Employee Pay Item tab. The check should be the same amount as before you added the new pay items. If the 403b is taxable by your local authorities, you'll see an increase in tax withheld.

Sorry about this ... :(
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

here's what I have: Interim Associate Pastor = IAP
IAP SS offset (income)
IAP 403b (income) FLA not taxable until withdraw (and they state preferably at retirement, not my circus lol)
IAP Salary (income)
IAP Housing (income)
IAP 403b deduction (liability, same amount as income) - we already have a liability account set up for this as one of the previous pastor had money withheld, I used the current liability account and didn't change anything)

When totaling everything all numbers come back correct as to the pay information agreed upon. The check amount will be the total for housing, salary and SS offset. The 403b income will show as income and not in box 12 and the deduction will show as a liability and will show on box 12E of the w2.

I think I understood it all completely. Thank you again for your help!

Robin

NeilZ
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Joined: Wed Oct 08, 2003 12:20 am
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Mon Sep 28, 2020 2:17 pm
here's what I have: Interim Associate Pastor = IAP
IAP SS offset (income)
IAP 403b (income) FLA not taxable until withdraw (and they state preferably at retirement, not my circus lol)
IAP Salary (income)
IAP Housing (income)
IAP 403b deduction (liability, same amount as income) - we already have a liability account set up for this as one of the previous pastor had money withheld, I used the current liability account and didn't change anything)

When totaling everything all numbers come back correct as to the pay information agreed upon. The check amount will be the total for housing, salary and SS offset. The 403b income will show as income and not in box 12 and the deduction will show as a liability and will show on box 12E of the w2.

I think I understood it all completely. Thank you again for your help!

Robin
Yep ... that's the setup .. good job.
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

Question on this again. His first pay was today, can I run a test w2 (I can't find a report that works that will give me this info) to see what it looks like to make sure everything is showing up in the correct boxes? He is questioning the income part of the 403b and wanting to make sure it's not showing up in the income box and in box 12...

Robin

NeilZ
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Joined: Wed Oct 08, 2003 12:20 am
Location: Connellsville, PA
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Thu Oct 15, 2020 7:16 am
Question on this again. His first pay was today, can I run a test w2 (I can't find a report that works that will give me this info) to see what it looks like to make sure everything is showing up in the correct boxes? He is questioning the income part of the 403b and wanting to make sure it's not showing up in the income box and in box 12...

Robin
Unfortunately, you can't run a W2 as it relies on 2019 data. If you did not check Box 12 on the income, but do have Box 12 setup on the deduction it will only show the deduction amount in box 12. No matter what he thinks, the amount paid by the church for the 403b is INCOME, however, it is non-taxable and should be setup that way in the deduction item to reduce the amount of taxable income for Federal income tax, I believe SS & Medicare but you should check that, and if you have state taxes (and the state follows the Federal income tax rules) reduce the state taxable income too.

I again refer you to my updated set of instructions that says for the income do NOT select any tax items there, you do that in the deduction item.
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

Just so I am clear, in box 1 it will show his salary, ss offset and this 403b income as a total (call it 50,000) , and then in box 12 (I have that checked) it will show the total that I deduct (call that 10,000). Box 14 will have house allowance. My answer is ALL income will show in box 1 and then box 12 will be deducted by the accountant doing his taxes as non taxable income? So he will pay taxes on $50,000 minus the $10,000.....

Robin

NeilZ
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Joined: Wed Oct 08, 2003 12:20 am
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Re: Interim Pastor

Post by NeilZ »

whfpc wrote:
Thu Oct 15, 2020 11:17 am
Just so I am clear, in box 1 it will show his salary, ss offset and this 403b income as a total (call it 50,000) , and then in box 12 (I have that checked) it will show the total that I deduct (call that 10,000). Box 14 will have house allowance. My answer is ALL income will show in box 1 and then box 12 will be deducted by the accountant doing his taxes as non taxable income? So he will pay taxes on $50,000 minus the $10,000.....

Robin
Yes the Box 12 items will be listed on the 1040 as an 'Adjustment to Income' and will reduce the amount listed as Taxable on the 1040. In the meantime he will not have withholding taken out on those funds.

FYI .. I should have said above, as a minister he shouldn't (and I'm guessing he doesn't) have SS and Medicare pay items as he files SECA taxes. So any reference to SS & Medicare in my instructions will not pertain to him, but does with non-ministerial employees.
Neil Zampella

Using PC+ since 1999.

whfpc
Posts: 103
Joined: Tue Aug 15, 2017 10:32 am

Re: Interim Pastor

Post by whfpc »

Thank you so much!!!

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