Housing Allowance Erroneously Reported on Form 1099-MISC

Question:

A minister received a Form 1099-MISC from a church. Most of the amount on the Form was designated as housing allowance (recorded in an official document by the church board when he began working for the church). He doesn't see a way to report this amount on his tax return, excluding it from federal income tax while paying the Social Security and Medicare (self-employment) taxes on it.

How should this be reported? Where does it go on the IRS tax forms?

Answer:

The church has filed an erroneous Form 1099-MISC. Housing allowance is not reportable as taxable income because it is exempt from income tax. The preparer should be apprised of this error and asked to file a corrected Form 1099-MISC. Near the end of the January 29, 2011, blog posting that I've linked below, I address the issue of housing allowance and Form 1099-MISC reporting-perhaps it will be helpful.

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Question: A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.) If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040? Answer: This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2 , not as independent contractors who receive Form 1099-NEC . Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowa

MinistryCPA - Corey A. Pfaffe, CPA, LLC

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