February 26, 2013

Correcting Minister's Erroneous Form W-2

Question:

A church figures its pastor's compensation package by budgeting a gross amount and allowing its pastor to allocate that amount into salary, housing allowance, health insurance premiums, etc. Salary and housing allowance are paid directly to the pastor in one bi-weekly check, while health insurance premiums are paid by the church on the pastor's behalf, with the amount essentially deducted from the gross compensation amount.

After receiving his Form W-2, the pastor noticed that all of his income (including housing allowance, health insurance premiums, etc.) was reported as a single amount in box 1.


Is there any circumstance under which all of his income should be reported in box 1 of Form W-2? If not, how can the church correct this situation?

Answer:

We recommend that a minister's housing allowance be reported on his Form W-2 in box 14 with the description "Housing Allowance." For 2012, health insurance premiums for small employers were not required to be reported on Form W-2 in any box. Therefore, the amount reported in box 1 should be reduced by the housing allowance and health insurance premiums.

When a mistake is made on Form W-2, the employer must issue a corrected Form W-2c

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