MinistryCPA - Corey A. Pfaffe, CPA, LLC

Question: How does a church correct a previous year's Form 1099-MISC which erroneously listed housing allowance in box 7 "Non-Employee Compensation?" Answer: Unlike the Form W-2, there is no separate form to correct an erroneously distributed Form 1099-MISC. Instead, a Form 1099-MISC should be prepared reporting the correct amounts, and the "Corrected" box should be checked on the top of the form. As for the housing allowance, simply r educe the amount in box 7 by the amount of designated housing allowance, up to and including the full amount originally reported in box 7. Be aware that this may result in a zero being entered in box 7 if the full amount was designated as housing allowance.

Question: How does a church determine a non-clergy employee's withholding? How does a church match an employee's withholding and where do they send the money? Answer: Typically, non-clergy employees and employers incur the following taxes: 7.65% FICA tax - While ministers are not subject to FICA tax and may not be erroneously classified as non-clergy for the sake of withholding and matching, non-clergy employees must have 7.65% withheld from their pay and an additional 7.65% contributed by the church. This is true unless the church has previously opted out of paying its share of FICA tax by virtue of filing Form 8274 and gaining approval from the IRS. This puts the entire 15.3% burden on the employee. Federal and State unemployment taxes - Generally churches are exempt from these taxes; however, some states may require state unemployment taxes be paid even by a church. Federal and State income taxes - Determined based upon withholding tables in IRS Pub 15 an...

Question: A church's pastor resigned a few months ago. Since then he has not been able to find work. The church took a love offering to help him with expenses. Does the church have to take taxes out of this offering since the pastor is no longer part of the church? Would the answer be different if the congregation took up a love offering for someone else in the community? Answer: Benevolent gifts to individuals in the local community (not an employee of the church), are generally disbursed by churches from benevolent funds received by the church to disburse to needy individuals. Since these individuals have not provided nor are expected to provide services in exchange for the gifts, these gifts are non-taxable. For more on benevolent fund giving, type "benevolent fund" in the search window above. Love offerings collected on the behalf of a current or former employee in consideration of past services provided are taxable compensation. Similar to compensation to the...

Question: A teacher in a foreign country was provided with "free" housing and food. Does this teacher need to report this as income for tax purposes? Answer: Publication 525 says the following: "You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. The meals are: 1. Furnished on the business premises of your employer, and 2. Furnished for the convenience of your employer. The lodging is: 1. Furnished on the business premises of your employer, 2. Furnished for the convenience of your employer, and 3. A condition of your employment. (You must accept it in order to be able to properly perform your duties.)" Publication 15 defines convenience of the employer as: "' For the convenience of the employer ' means you have a substantial business reason for providing the meals and lodging other than to provide additional compen...