HA for Youth Pastor approved after the fact...

Our new Youth Pastor's housing allowance didn't make it in the budget approval prior to the new year, however, we did call a special meeting in January and it was approved.

My problem is that when he was hired in October, I set him up with a housing allowance. He's already filed his taxes for this year and I'm at a loss as to how to fix this without creating havoc everywhere.

Comments for HA for Youth Pastor approved after the fact...

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Designating HA
by: SomeDeacon

My church has had similar cases to the question.

You cannot "fix", change, or add a Housing Allowance (HA) after the income is received.

My interpretation of the IRS law is that the HA amount must be officially designated before the payment is made. That designation does not need to occur at the beginning of the year as my church once assumed. It can happen at any point prior to the payment for which the designation applies. Again, my interpretation is that the church could choose to amend the HA by making a new designation later in the year which would then apply to subsequent payments only. We had this case when promoting a pastor from part-time to full-time.

If a pastor was hired mid-year or for some other reason a HA designation was not made, then a designation could still be made which would affect all remaining income. It is a bit more trouble for preparing the W-2 form and also the pastor doing their taxes, but the benefit in tax savings should be worth the effort.

Budget Amendment

If you are concerned how to adjust the budget it is done with a budget amendment that should list out the following:

1. List out the reason for the amendment
2. List out the Accounts to be affected.
3. Schedule out the Amounts to be adjusted
4. Schedule a place for the Signature(s) of
your church's governing body (Trustees,
Finance Committee, etc).

Present the amendment to the governing body, answer all questions and call for a ratification of the amendment. If it amendment is approved and signature affixed to the amendment, make the modification.

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