Reimbursement Policies
Reimbursement Policies Many religious organizations have made fixed sum monthly payments to their minister or other staff for a “travel or professional allowance” and do not request an accounting for how the money was spent. Allowance plans are always taxable are reported on Form W-2. It is strongly recommended that the congregation establish an Accountable…
Quarterly Payments Tips
Quarterly Payments Tips In a non-clergy job, the employer withholds an employee’s federal income tax and Social Security tax from every paycheck. But clergy are classified as dual status employees and are exempt from both federal income tax withholding and considered self-employed for Social Security tax purposes. This means a church normally won’t withhold income tax and…
What Does Clergy Dual Status Mean?
What Does Clergy Dual Status Mean? Under federal law, most ministers have dual tax status. Dual tax status means a minister is an employee of the church for federal income tax purposes, and self-employed for Social Security and Medicare taxes. For ministers, wages are reported in two different ways: Federal Income Tax = Employee status…
Limitations on the Housing Allowance
Limitations on the Housing Allowance After reading about the Housing or Parsonage / Manse Allowance, you may be thinking, “if I designate my entire salary as a Housing Allowance, would it all be excluded from federal income taxes?” IRS has already addressed this by limiting the Allowance to the least of the following: 1. The…
Commuting expenses deductible?
Commuting expenses deductible? You cannot deduct the costs of taking a bus, trolley, subway, or taxi or driving a car between your home and your main church or regular place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your church or regular…
Understanding Clergy W-2 Form
Understanding Clergy W-2 Form By January 31st, an employer must give or mail an employee’s copies to each employee from whom the tax was withheld during the year or wages paid for services. For employees whose employment ends before the end of the year, W-2 Forms can be supplied any time after employment ends, but…
Nontaxable income for clergy?
Nontaxable income for clergy These are examples of sources of income that are non-taxable: • Qualified love gifts (person-to-person and within limits) Cannot be solicited Must be spontaneous in nature Must be clearly ascertainable as a gift with no service attached Cannot qualify as a tax donation for the donor Are motivated out of affection…
Reporting the Housing Allowance
Reporting the Housing Allowance The designated housing allowance may be reflected on Form W-2 in Box 14 with the notation, “Housing Allowance.” Though not required, this reporting method is suggested by Publication 517. Or, a church can report the designated housing allowance to a minister by providing a statement separate from Form W-2. This may…
Do managers need to be classified as exempt?
Do office managers need to be classified as exempt under the Fair Labor Standards Act? No, it’s fine to classify office managers as nonexempt. You are under no obligation to classify any employees as exempt, even if they meet the criteria under the Fair Labor Standards Act. You could have an entire workforce of nonexempt…
W-2 vs. 1099: Which workers get which?
W-2 vs. 1099: Which workers get which? As the economy continues to expand, churches now more than ever need to possess a thorough understanding of the classification for each person performing services for the church. Knowing whether the IRS views someone as your employee or as an independent contractor dictates tax obligations and associated paperwork,…