benefit package for Pastors

by Sherry

We are a small church and do not have a group health ins. policy. this is how we would like to present a compensation package for our new pastor.

The church will designate a "total package" price.
The pastor will then complete a form indicating 1)the amount he would like paid to his retirement account (sent by the church to the denominational association's retirement fund), 2) the amount of his medical insurance premium (mailed by the church to his own health insurance company) and 3) the balance would be his gross check amount.

An additional form would be completed by the pastor, breaking down his anticipated housing allowance and that amount would be approved by the church body with the understanding that the pastor would have to substantiate that amount for tax purposes.

The church would base his w/h taxes on the gross paycheck amount less the housing allowance, plus the amount we reimburse him for 1/2 of his SE tax deposit.

The amount paid by the church for his retirement and for his medical insurance would be listed on his tax statement at the end of the year in the appropriate boxes.

Is this legal?

Comments for benefit package for Pastors

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Your benefits question
by: Charles

Sherry, did you ever get an answer. I have the exact same question and have been to the IRS site and well as dozens of others. Have yet to find a "pat" answer.

by: Sandi

if you want an answer to is it legal, you need to call the IRS :-/ I suggest you research some more first...

Have you researched IRS Pub 15 series?

Allowing the pastor to choose how much goes where would make it all "income"

The church can provide specified amounts to qualified plans, these are things that would be reviewed yearly and adjusted as needed.

With so many changes in health care it might be best for your small church to NOT provide it as a separate item, just include the amount as income. The pastor would be able to deduct his own health insurance on his self employment return...

the pastor cannot give you a number for housing allowance, the church must decide what is comparable for your area for the coming year (if hiring in Aug 2013 it must be decided and voted on by the church July 2013 at the latest-normally this would take place end of year meeting-example; December 2012 meeting to start in Jan 2013)

as for the 1/2 SE tax, as you have to include it as income anyway and the pastor has to file their own quarterly taxes...why separate that, it just creates extra work...

Hope this helps,

Reply: Benefit Package
by: Anonymous

First comment I would make is that the Church does not withhold from the Pastor's pay any Fed or State Income tax nor any SS tax.

The Pastor may ask that a specific dollar amount be withheld and sent to the IRS if he should choose. The Pastor would be responsible to pay his estimated Qtr tax and Self Employment Tax (SET) to the IRS his self.

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