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Church accounting for contribution paid to pastors retirement fund

by Glenda
(Detroit MI, USA)

How should you treat a board approved amount of funds to be given to the pastor?

The church does not have an existing plan, but will give pastor a certain amount of funds to deposit into their personal retirement account.

Should this be reported on W-2 or it is treated the same as housing allowance? Thank you

Comments for Church accounting for contribution paid to pastors retirement fund

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Jun 14, 2023
 Taxable Income
by: Vickey

It is taxable income, so it must be reported in Box 1 of their W-2.

If the church had set up a qualifying retirement account and contributed to it for their employees...it would be nontaxable...but giving the money directly to the employee...makes it taxable.

Now, you can set up and approve a housing allowance and those monies would NOT be considered TAXABLE income and would be reported in BOX 14 on the W-2.

However, you should share with your pastor what is considered eligible housing expenses: https://www.freechurchaccounting.com/housingallowance.html

Payments to a retirement are NOT an eligible housing expense...but it can be a tax deduction on a personal tax return =)

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Join in and write your own page! It's easy to do. How? Simply click here to return to Minister's W-2.

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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