minister's only "pay" is his housing allowance. W-2 needed?

I have a minister whose only "pay" is his housing allowance. Does he need a w-2 with box 14 for the amount of the allowance?

Comments for minister's only "pay" is his housing allowance. W-2 needed?

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Jan 30, 2017
Housing Allowance
by: Anonymous

It is concerning that the only pay a pastor receives is housing allowance.

Once the IRS sees that, it may cause a red flag; they may see that as the pastor trying to avoid paying income taxes.

It is important that when determining what will be housing allowance and what will be salary, the housing allowance should not be more than the salary.

To not raise any red flags, the housing allowance should not be more than %50 of what the salary is.

For instance, if he is receiving $1,000/wk in salary, his housing allowance should not be more than $500; in other words, he would be receiving $500 salary and $500 housing allowance to be on the safe side.

Should his housing allowance become more than his salary, then his salary AND housing allowance should be adjusted yearly to reflect that; however, it will never be 100% accurate.

AND yes, he still needs a W-2, only the housing allowance will be reported in another section on the W-2.

Feb 01, 2017
I have the same question
by: Anonymous

I have the same question:

Is a W-2 needed if a minister's pay is all allocated to his housing allowance. (He is part time and has another job.)

Also, does the church need to file quarterly tax returns Form 941 in this scenario?

Thank you!

Feb 01, 2017
Housing Allowances are NOT Reported on Form 941
by: Vickey

To answer one of the poster's question on housing allowance...you do NOT report a housing allowance on a Form 941.

If all of a minister's compensation is designated as a housing allowance (and you can designated 100%...see this article on that discussion here:
http://www.freechurchaccounting.com/designating-all-salary-as-housing-allowance.html) ...

there are a couple of different ways to handle it and "experts" disagree on the which one is the right way...so my advice to you is to consult a VERY knowledgable CPA or tax professional.

Some say a quarterly 941 and W-2 should be filed even though you would be putting all zeroes in everything except Box 14 of the W-2 (Informational box to report housing allowance in).

Then I have seen other articles from church accounting "experts" that say you can simply report the amount in a church letter to the recipient.

ALTHOUGH most will agree that a W-2 should be issued.

So please consult a "professional" with this question.

P.S. I do agree with the poster that stated that a designated 100% (or majority of compensation) for a housing allowance for an individual with no other income or spousal support could definitely raise a red flag with the IRS.

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