W2 with no wages but only housing allowance and federal tax withheld

by Rick
(NY)

This is my first time filing taxes as a bivocational pastor. I only take a housing allowance from the church.

I had them withhold federal taxes on it in order to pay the SECA on the housing allowance. We use ADP for the payroll.

There is nothing in box 1 of my W2 since I had no wages. Box 2 has the federal tax withheld.

Turbotax will not let me submit a W2 that has federal tax withheld that is more than the wages.

What is the correct way to report the HA?

Should we not be doing a W2 and just do a 1099mis?

How to I report the federal tax I had withheld in 2018?

My wife and I both have other jobs which we have W2s for.

Comments for W2 with no wages but only housing allowance and federal tax withheld

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Feb 09, 2019
Clergy Housing Allowance is Considered Nontaxable Income
by: Vickey

I am surprised ADP allowed you to set up withholdings on "nontaxable" compensation. The payroll software I use for my bookkeeping clients doesn't let me set up "voluntary" withholdings on a housing allowance.

But I digress...a Turbotax Tax Pro in the Turbotax Support Community suggested: "If you have no wages in box 1 then you can put $1(one dollar) so that the software can understand the information. A zero for wages will cause complications for E-file."

As far as how to report your housing allowance, you will report the lesser of 3 amounts (see more on those amounts on my housing allowance page by clicking on RESOURCES at the top of this page...then click on MINISTER TAXES and scroll down to the "Housing Allowance for Ministers" link.).

You will report that correct amount by filing Schedule SE (Form 1040) with your return.

Turbotax is pretty good software to use for minister because it will ask you in the beginning if you earned any income from being a minister. When you answer yes... the software will take you through reporting your ministerial wages and housing allowance payments.

NOTE: I can't tell you the countless clients and readers that have contacted me ...upset because the Social Security Administration was not showing what they thought they had paid in for SS...only to find out later that they, a relative, or even a tax professional filed their taxes incorrectly as a minister!

SO I'm including a quick side note: if you are not sure that you or Cousin Joe, or that tax preparer down at your local Walmart knows what they are doing ....PLEASE hire a knowledgeable tax preparer that you KNOW beyond a shadow of a doubt KNOWS how to prepare minister's taxes!

Ok...climbing down off my soapbox and continuing on with the rest of your inquiry =)

In regards to your inquiry: "Should we not be doing a W2 and just do a 1099mis?"

No, a minister has a very unique "status" with the IRS. They consider them to be an employee of the church for income tax purpose and even though they consider ministers self-employed when it comes to paying Social Security and Medicare taxes...they will in MOST cases "classify" them as W-2 employees.

I've heard many church accounting experts debate the requirement of a W-2 when a minister is only paid a housing allowance. Some say the church only needs to report it to the minister employee in a church letter. Some say that you should issue a W-2...even though all boxes are USUALLY empty expect for Box 14 (where you are suppose to report the housing allowance payments total). My advice is usually...I'd rather be safe than sorry =)

BUT always remember this... housing allowances are NEVER NEVER reported on a 1099-MISC!

Sorry to be so long winded=)

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