Skip to main content

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

Comments

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.