How to handle voluntary Fed and State tax withholding for pastors with 100% salary as housing allowance
by Mark F
I am the treasurer for a small church. We have 2 employees, both pastors, who have elected to be employees for tax reporting purposes.
Due to their housing allowances being greater than their wages, they have no salary to report. However they have elected (via Form W-4) for voluntary Federal and State tax withholding.
Do I need to file a quarterly Form 941 for them?
The online service I'm using for attempting to file a Form 941, will not allow Line 2 (Wages, tips) to be less than Line 3 (Federal income tax withheld), which is the situation I have, i.e. no salary due to housing allowance, but yet voluntary tax withheld.
As I’m reading comments to questions on this blog, it appears that I do not need to file a Form 941 and that I should not be withholding Federal and State income taxes for our pastors, since I have no way to report them or to deposit them to the IRS. Is that correct?