FICA being withheld from Housing Allowance.

by Deborah

I am working on a tax return for a minister who is an employee of the church and receives a housing allowance. On the w-2, the housing allowance in included in box 3-Social Security wages and Box 5 Medicare wages and SS and MC is withheld. Is this correct? How is this handled on the Tax Return.

Box 1 only includes the taxable income and does not include the housing allowance.

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May 16, 2021
CANNOT Withhold FICA from a Housing Allowance
by: Vickey

That church needs to do a MAJOR correction!

1) FICA is NEVER withheld or matched from ANY of minister's compensation (salary or housing allowance)

2) There should NOT be anything reported in Boxes 3, 4, 5, and 6 on a minister W-2. See this page for an example of a minister's W-2:

3) A housing allowance is nontaxable income and no taxes should be withheld from it.

4) Housing allowance payments are reported in Box 14 (a taxpayer's informational box) or in a letter from the church.

At this point you will probably have to file an extension for the minister, so the church can correct his W-2 and the incorrect way their payroll was handled =(

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