Skip to main content

Form W-2 and a Pastor's Auto Allowance

By
An auto allowance advanced by a church to its pastor is subject to very exacting accountable plan rules. See my explanation on my website at MinistryCPA.org under Minister and Ministry Tax, Top 10 Questions #4.

 The church must receive timely evidence of the pastor's business mileage when it offers advances. Generally, I recommend that a church reimburse its pastor for business use of his personal automobile (at the current IRS rate) only after documentation is received.

 Under accountable plan rules, when auto allowance advances exceed the allowable deduction (qualified miles times the current IRS rate) the pastor is required to refund the excess advance to the church. Otherwise, the arrangement is disqualified and the entire annual allowance should be included in Box 1 of the pastor's Form W-2.

 Simply including the excess amount in Box 1 is not in compliance with provisions of the Internal Revenue Code.
Labels:

Comments

  1. AnonymousOctober 27, 2008 at 5:14 PM

    Corey...great blog site!

    I am a church administrator in La Crosse (WI) and am having a hard time finding an answer to my question about pastors w-2's and Roth 401(k) plans.

    With traditional plans, we simply reduce Box 1 by the amount of the deferral.

    For all the nuances with pastoral income and taxes, is it as simple as NOT reducing Box 1 by the amount of any ROTH deferral?

    I find that many churches are not offering the ROTH for their 403 or 401, so I have exhausted my network of answers in this area.

    Thanks for any insight you may have!

    Mark
    Bethany Evangelical Free Church

    ReplyDelete

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a
Post a Comment
Read more

Review: Form 1099 Payments to 501(c)(3) Organizations

By Anonymous
Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries
2 comments
Read more

Form 944 or 941 Filing for Churches

By Anonymous
Question:   A new church filed for an employer identification number (EIN) recently. It received notification from the IRS about the EIN, stating that the church must file Form 944 by the following January deadline. The church has no non-ministerial staff members. Since income tax withholding is elective by ministers and none of the pastors has elected to request non-mandatory withholding is the church required to file Form 944 annually? Also, a quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Technique Guide  explains in further detail a minister's treatments for social security, Medicare tax, Fed
Post a Comment
Read more