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College paying Minister employee housing allowance.

by Stephanie
(Illinois)

I am a tax professional who does many clergy tax returns and think I know all the rules but...

Several years ago I had a client start teaching at a Christian College in TX. This college pays him as an employee taking FICA/Medicare and FWH from his check. They also have an amount in box 14 for housing allowance. This amount is on top of his box 1 wages.

We declare it as housing allowance and pay self-employment tax on it every year but I am wondering if this is even correct.

In my opinion, they shouldn't be giving him housing as a teacher. He is not performing sacraments, preaching, or ministering.

I have brought it up with the client who has brought it up with HR at the school. He's pretty much been told to stick with what he knows and go pray and let her do the accounting work.

Comments for College paying Minister employee housing allowance.

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Mar 06, 2022
 Qualifying Housing Allowance NEVER Reported in Box 1
by: Vickey

There are several "errors" with your client's payroll.

1) "Qualifying" housing allowances are NEVER reported in Box 1 of a minister's W-2 as they are considered "nontaxable" income.

2) "Qualifying" ministers are NOT paid under the FICA system, so an employer should NEVER report a "qualifying" housing allowance in Box 14 and withholding and matching FICA taxes =(

Since his employer is reporting FICA taxes and his compensation in Boxes 3, 4, 5, and 6 AND reporting his housing allowance in Box 1 as taxable income... I think they are classifying him as a "non-minister" employee... which from what you have stated... sounds like the correct classification.

If you have prepared his taxes with paying self employment taxes on something he has already paid FICA (Social security and Medicare) taxes on...he has double paid those taxes and his returns should be amended.

I would also advise your client to ask the payroll manager not to report his housing allowance in Box 14... but since Box 14 is an "informational" box only... maybe it can just be ignored... if he has proof that "allowance" is reported in Box 1, 3, and 5.

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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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