Can Box 1 include Housing Allowance?

by R Kreider
(Philadelphia, PA)

I have previously read "do not include clergy Housing Allowance in Box 1 taxable income" so I know that's the recommendation.

However, if this does happen (our payroll service created W-2's including it in box 1 but not box 14) will it cause problems, as long as the pastor can deduct the appropriate amount from taxable income reported on SE forms?

Pastor is aware of the approved amount, and has a letter of documentation.

Comments for Can Box 1 include Housing Allowance?

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Feb 07, 2021
Issues from Reporting Housing Allowance in Box 1 of W-2
by: Vickey

Yes. It will cause issues for the minister. He will be required to pay income taxes as well as the SE tax on the total amount reported in Box 1 of a W-2.

Since a housing allowance is exempt from income taxes (in most states), he will be incorrectly paying additional income taxes.

Please contact your payroll provider. They will have to file corrected returns for all 4 quarterly 941s for the prior year and a corrected W-2.

If it is their error (you told them it was a housing allowance for a minister) ... they will have to file those corrected forms free of charge.

If it was your error, you will be responsible of the fees and charges to file those corrected forms.

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Join in and write your own page! It's easy to do. How? Simply click here to return to Housing Allowance.

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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