HA pay is only recorded in church financial books and not declared elsewhere except by letter to the clergy...correct?

by Carol
(Colorado Springs, CO)

Our part-time clergy receive their full pay as designated HA. My understanding is that it is NOT included in the wages reported on our Qtrly 941s.

Since the resulting W-2 Box 1 is zero our payroll does not issue a W-2 so they receive, instead, a letter from the church indicating the amount paid to them as HA.

Am I correct that their pay is recorded only in our financial books as HA and is not reported BY US in any other form to any other government entity?

Which would mean that SSI and Medicare is dependent on the pastor to declare his HA income and that that is the only way they would be aware of it? Of course it would be in the pastor's best interest to report it and pay the resulting SSI and Medicare for future credit.

Comments for HA pay is only recorded in church financial books and not declared elsewhere except by letter to the clergy...correct?

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Apr 08, 2022
Housing Allowance is NOT Reported on a 941
by: Vickey

You are correct in that designated and approved housing allowance payments are not reported on a quarterly 941 form OR in Box 1 of a W-2.

The church could do as you stated and "report" the amount of the payments to the minister on a church letter head "notice".

Even though it is not the church's responsibility to make sure the minister reports those payments on their tax return ... I would make sure that they understand that those payments are subject to SE (self employment [SS and Medicare]) taxes ... unless they have been approved by the IRS to opt out of the Social Security system.

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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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