Skip to main content

W-2 Reporting of Church Contributions to 403(b) Plans

Question:

When a church contributes a nonelective contribution (see definition in IRS Publication 571) each month to a pastor's 403(b) account that is not tied to the salary and is not Roth related, how is it reported on a W-2?

Answer:

As long as the contributions are made in accordance with a qualified plan (the investment firm can tell you whether the plan is set up to receive employer contributions of this nature), then there is no Form W-2 disclosure other than to check the "Retirement" box indicating that he has an employer plan.

Comments

  1. What would be the reporting rule if the church wrote the check directly to the minister rather than to a financial institution?

    ReplyDelete
  2. Writing the check directly to the pastor results in taxable income reportable as Compensation in Box 1 of Form W-2.

    ReplyDelete
  3. In this case, can the pastor then write a check to his 403b, in which case it would be deducted from his Gross Wages Box 1?

    ReplyDelete
  4. IRC 403(b) plans are employer plans. Contributions by the employer (church) are made 1) from amounts withheld from its employees (called "elective deferrals") or 2) from its own church budget as a employee benefit. The pastor should not / cannot make a direct contribution.

    ReplyDelete

Post a Comment

Popular posts from this blog

Qualified Small Employer HRAs

On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms.

After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers.

To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees.

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms.
No salary reduction contributions may be made (i.e., 100% employer-funded).Employer must receive proof of employee’s minimum essential coverage.Reimbursements must be for qualifying medical expenses.Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation.Employer must offer the …

Gifts Paid Out of Church Funds: Form 1099-MISC Requirements

Question:
 A church gave a wedding gift of $1000 to a couple who are church members. No goods or services were provided by the couple in exchange for the gift.  Is a Form 1099-MISC required? 
Answer: In the following answer, we assume that the couple are not employees of the church from whom the gift could not be viewed as compensation for their services. Also, the amount seems to be small enough to avoid any concerns of "private inurement."

Accordingly, no Form 1099-MISC is required. According to the 2017 IRS Instructions for Form 1099-MISC a Form 1099-MISC is only required for payment of goods or services. The requirements are as follows:
"File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:  At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8);  At least $600 in:  1. Rents (box 1);  2. Services performed by someone who is not your …

Revised Form I-9 Released

The U.S. Citizenship and Immigration Services released a revised Form I-9. All new hires after January 21, 2017, must complete the revised Form I-9. All prior released versions of Form I-9 will be invalid for new hires.

Employers are required to have a completed hard copy of Form I-9 on file for each employee. Current employees do not need to re-complete the revised form.

More information on Form I-9 can be found on the USCIS website.