Accountable a Expense no longer valid under the ACA?

by Michael
(Grand Rapids, MI)

I found that my W-2 form from the church where I serve as lead pastor added my Accountable Expense Plan monies AND the $1000 I allocated for medical expenses back into my line 1 wages and line 14 housing allowance, making both of these amounts now taxable income.

This seems totally wrong to me.

Now I have the tax company that did the W-2's telling me that they think the Affordable Care Act took away these two benefits for pastors, which is why my W-2 came out the way it did.

From what I've read both on the IRS site and the ECFA's publication, I think this tax company is flat wrong. Yes? I am in a ACA compliant group plan health insurance program through the church. So to my knowledge, both of these amounts above should not have appeared on my W-2 at all.

Am I correct? On what basis?

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Apr 17, 2016
Your instincts are likely correct
by: Bill OConnell

Pastor Michael

While additional details would need to be known to answer your questions with 100% certainty, your understanding of these issues seems correct.

Assuming that to be the case, you will need to have a W2c prepared so that you can properly file your 2015 form 1040. That will then require amending the payroll tax returns filed on behalf of your church.

Any other employees of the church receiving Housing Allowance, or under an accountable plan, or with proper HSA deductions will also need a W2c. If any of you have filed your 1040 on these forms, you have likely overpaid, and should be filing a 1040X.

Please call me at 617-921-9321 to discuss the details further. Wisdom Over Wealth, my CPA Ministry, can help you tidy this up.

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If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)

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