If the social security and medicare wages and taxes are filled in, make sure it was on the full amount of wages (sometimes on a single W2 you have clergy wages mixed with regular wages if their position changed mid-year --- if that is the case, you have to get the totals right and enter it as if it's actually 2 different w2s to get it to report correctly). If the taxpayer is clergy and the church withheld these taxes, you should have them fix it moving forward. It is incorrect.
Amazing, thank you for the detail explanation. Can you please talk about how to file a deceased person's last return? Like single parent or relatives or friends with no decedents? TIA!
Awesome, I'm glad it helped! Thanks for watching and commenting. I haven't actually done a lot of tax returns for deceased taxpayers. It's a little easier on a joint return if the spouse is still living. Here's some info to check out on the IRS website though. All the answers should be here. www.irs.gov/individuals/deceased-person
so if a minister who is single, makes 105,611. in wages and has a 14, 999, housing allowance, actual income is 120, 611.38, which he has to pay taxes on and where does he calculate the SE tax at is the housing allowance used as his schedule c profit loss statement and u didn't mention any deductions other than children are there any others
Hey Kristina, thanks for watching and commenting. Very often a minister will not have a Sch C (although sometimes they can). The SE taxes (on his base wages and MHA) are calculated on the SE Form. There could be all sorts of different data input options depending on the software you're using. I'd highly recommend you find a preparer familiar with clergy taxes to help you.
I saw and replied to your email as well. Unfortunately I'm not familiar with every tax program so I can't help. You may need to contact the software company to ask them (but I wouldn't hold my breath on them knowing what you're even talking about). Turbotax has it, but you have a series of boxes to check just right while holding your breath and looking in the right direction to get their program to handle it right and even then it seems to not work right 100% of the time. I'd recommend a professional who knows how to do clergy taxes.
If you're a 1099 contract and not an employee then you'd report income and expenses on Schedule C. However, most pastors get a W2 (even though they are "self employed") and as a W2 employee you cannot deduct business expenses and mileage. The only option would be if the church reimburses you for those business expenses.
@@IntentionalFinance101 Thank you for your response. Since I'm an Interim Pastor, the church has not given any document for year end compensation. Which would be more beneficial/proper?
@@lwcmoments1049 Interim doesn't really matter... i can't exactly give proper advice through youtube comments... The church needs to reach out to a professional who can properly advise them. If you're an employee they need to do a W2. If you're a contractor then they need to issue 1099-NEC. Both are past the due date at this point.
Pastor being paid as self-employed but changes to employee-paid with taxes taken out during the year. Would you discuss how taxes would be prepared for this change in the middle of year?
That can get a little complex as well. Is it with the same employer or a different employer? It's much easier with a different employer. But if you're pastor and then go to a 'normal employee' with the same employer you may get a W2 that has pastoral earnings mixed with 'regular' earnings. That just takes an extra step of some math to get it into the system correctly. If it's two different employers it's much easier.
You’ll have to get the breakdown. Perhaps your employer can get that for you. I’ve entered this into the software as two different W2s even though it’s only one. Otherwise it isn’t reported properly
Great video. But what if you get back housing, but your w2 also takes out for Social Security and Medicaid. Example. Make $40k but $10k being housing. So on the W2 it shows $30k for income, ss, and medicaid. Do I just file the $10k for Self employment, since the other $30k had SS and Medicaid already paid for? Thanks in advance.
Thanks for watching! And great question. You should actually get the church/organization to correct it. You should not be qualified to get MHA while also having Soc. Sec. and Medicaid withheld from your paycheck. The only reason that should happen and it be correct is if for part of the year you did not qualify as pastoral staff and then part of the year you did. In which case that should be handled differently. If you were a qualified pastor/minister for MHA for the entire year, the church/organization needs to not only stop doing it the way they are, they need to amend payroll reports, refund taxes withheld to you, and correct the W2.
That's a good question. SECA taxes (for clergy and self employed individuals) are calculated on the personal tax return separately, but just like income taxes. Both SECA and income taxes should be paid in through withholding or through quarterly estimated tax payments. It's possible as a pastor to have withholding from your W2 paycheck which can cover the income and SECA taxes. Or to have withholding from an unrelated W2 job (or spouse's W2 job) be high enough to cover all taxes. It's a little hard to explain... basically, if you do have some withhlding from somewhere covering all taxes owed, you're good. If not, you need to pay estimated taxes quarterly.
It really depends on the situation... It could be that the church or organization has reported it incorrectly and it should be a W2. Or it could be that it's accurate, in which case you would most likely need to report the income on Sch C.
Pastor taxes are little more complicated than many people think. I tried the make the video as straight forward as possible, perhaps I need to see if there are ways to make it more understandable.
Client is a pastor that changed churches. Church #2 took out social security and medicare taxes out on him. He must have failed to inform then he has opted out. What does one do in a situation like this?
That W2 is wrong either way. Even if a pastor does not opt out of SECA the church is not supposed to withhold soc sec and medicare taxes. They are doing the w2 wrong. Unless he happens to not be in a pastor role with the new church, which seems unlikely, but definitely worth asking.
Thanks for watching and commenting. Everything in this video is current except for the tax form itself. However, if you're watching and I point out a line, such as taxable income or AGI, it may be a different line number on the new tax form but it will still have the same description. The overall principles are still applicable though.
In this scenario, how would an excess allowance have been reported? Say he was given the MHA of $20k and his actual expenses were $18k. How would he have reported the $2k excess?
Hey Cathy, it gets added to line 1 of form 1040 (where the W2 wages are reported) and off to the left "excess allowance" gets written on the tax return. If the information is entered correctly into any tax reporting software it should do this automatically.
Do spiritual workers that don't have a pastoral license, but are associated with a organization like a church also get the same tax benefits as ministers/pastors 🤔
The main benefit is housing allowance (being treated as self employed I wouldn't really refer to as a benefit :) ). Minister of the gospel is not defined in the tax code that references the housing allowance, but employment tax regulations define what services performed by a minister constitute ministerial services for self-employment tax purposes. Case law and IRS rulings generally deal with whether an individual is considered a minister. Under the self-employment tax regulations, three types of services are considered ministerial: (1) the ministration of sacerdotal functions (e.g., baptisms, weddings, funerals, etc.); (2) the conduct of religious worship, whether or not it is performed for a religious organization; and (3) the control, conduct, and maintenance of religious organizations (including the religious boards, societies, and other integral agencies of such organizations), under the authority of a religious body constituting a church or church denomination (Reg. Sec. 1.1402(c)-5(b)(2)). If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister of the gospel.
What if you are a pastor, employed by a church, have a housing allowance, but have numbers in 3-6? Do you still have to pay self employment tax on income and housing allowance? or just housing allowance? or neither??
hmmm... most likely the W2 is wrong. It needs to be brought to the attention of the church staff who handle payroll. perhaps they can correct it, or at least do it right moving forward. it could also be that the employee was a non-pastor employee for part of the year and a pastoral employee for part of the year. it's hard to say without seeing it and knowing the details.
@@IntentionalFinance101 This is my exact scenario. I I was commissioned halfway through the 2021 year. So I have numbers in 3-6 while also needing to submit a housing allowance. Turbotax is asking if I need to pay self-employment tax on my wages and housing allowance, do you know what If I need to pay SE on both my wages and HA or just one of them?
@@jakejohnson7151 Soc Sec and Medicare were withheld up until you became a commissioned pastor. So you do not need to pay SE tax on that portion. The only way I know to get the tax return to be correct is to take the 1 W2 and enter it into the software as if it were 2 W2s. Enter one as a regular employee and one as a pastoral employee. The pastoral employee income may be the difference between box 1 and 5 but it may be different if you had a retirement plan or other pre-tax deductions from your payroll.
The church may give love gifts for four different reasons. Meet a benevolent need, compensate a visiting pastor, compensate an employee, or bless a ministry. Each type of gift has different rules based on the circumstances.
The employer (church) is required to provide you with a W2. It has to be provided (mailed out) no later than Jan 31. It's possible if they use a payroll service that it was provided electronically. I would ask the church for a copy if you didn't receive it yet.
It has to be board approved (in the minutes) or leadership approved and documented somehow before it is paid. That’s the requirement. It does not have to be shown on the w2. It can’t be retroactive though and it can’t be informal.
Great video. I am on a W-2 job. I get pay every week for 40 hours. Recently I missed sending my timesheet so I was not paid on time. The employer told me "you will get it retro paid next week". Next week, I got paid 80 hours (40 hours regular + 40 hours retro). But, There is a Over Tax withholding on payroll because of 80 hours /week. I understand it. The higher amount the higher tax withholding. But, why do they added 40 hours in my regular? That causes to show my salary increased as doubled. They are supposed to send a separated check for the missing. It is a missing 40 hours. it is not a promotion, it is not a raise or overtime. When I talked to employer they just keep saying its correct. There is no mistake. Please advise me. thank you
If I understand correctly you were paid the correct amount as gross salary (2x a normal week). You were NOT paid 1.5x overtime pay for "extra" 40 hours. However, you tax withholding was not 2x the normal withholding, it was more than that? The withholding table looks at frequency of pay and amount paid during the pay period. So it does make sense if they just added it on top that the withholding would have been more than simply 2x the normal withholding. It was an automatic calculation in their payroll software I'm sure. There was probably a way to avoid it, but now it's already been withheld.
@@bradw935 thanks for your reply. Yes they took more tax as usual. For instance on my weekly payroll my federal tax is $300 per week. I missed a week. so on next week they paid myfor 80hours then then took $800 tax from my paycheck. so I lost $200. in next week it back to normal as usual. because my salary is fix no change at all. but we should I lost $200 for they mistake. How ahould I ask them to fix it? They should calculate the missing 40hours as a separated check and withdraw $300 as usual. Am I right?
@@kevinnaj1518 That could've been done I believe. But now they've already withheld it and remitted it to the IRS. They could withhold $100 from your next check to make up the $200 difference, but it'd have to been done manually somehow in their payroll system. Otherwise, you just have to wait until you file your tax return next year.
@@IntentionalFinance101 Right. I know they dont want to fix it. Because they keep saying the payroll is correct. It may happen someone forgets to send to send timesheet ontime but they should not pay in that way as retro pay. Am I right?. So what should I say to them for next time as payroll terms? Sending separate check for missing payment?
I’m sorry, there’s not really much I can do for you. It’s up to your company and their policies. Sounds like you’ve tried and you’re out of luck. As far as what to say next time, my main recommendation would be not to forget to submit your timesheet since you now know how they handle it.
Best instructions for ministerial tax returns I have found!
Awesome! Thanks for commenting and letting me know. Glad it helped!
WHAT HAPPEN IF THEY HAVE FILLED UP 1-6 ? HE DOES NOT NEED TO DO SELF EMPLOYED RIGHT?
If the social security and medicare wages and taxes are filled in, make sure it was on the full amount of wages (sometimes on a single W2 you have clergy wages mixed with regular wages if their position changed mid-year --- if that is the case, you have to get the totals right and enter it as if it's actually 2 different w2s to get it to report correctly). If the taxpayer is clergy and the church withheld these taxes, you should have them fix it moving forward. It is incorrect.
Thank you very much for this video 🙏 😊
My pleasure 😊 Glad it was helpful.
Amazing, thank you for the detail explanation. Can you please talk about how to file a deceased person's last return? Like single parent or relatives or friends with no decedents? TIA!
Awesome, I'm glad it helped! Thanks for watching and commenting. I haven't actually done a lot of tax returns for deceased taxpayers. It's a little easier on a joint return if the spouse is still living. Here's some info to check out on the IRS website though. All the answers should be here. www.irs.gov/individuals/deceased-person
Awesome! This is just what I was looking for. Thank you for sharing.
Glad it was helpful. Thanks for watching.
Great stuff! Thanks so much for the education brother!
absolutely! Thanks for watching.
so if a minister who is single, makes 105,611. in wages and has a 14, 999, housing allowance, actual income is 120, 611.38, which he has to pay taxes on and where does he calculate the SE tax at is the housing allowance used as his schedule c profit loss statement and u didn't mention any deductions other than children are there any others
Hey Kristina, thanks for watching and commenting. Very often a minister will not have a Sch C (although sometimes they can). The SE taxes (on his base wages and MHA) are calculated on the SE Form. There could be all sorts of different data input options depending on the software you're using. I'd highly recommend you find a preparer familiar with clergy taxes to help you.
How do you enter Housing Allowance...MHA not listed in dropdown
I saw and replied to your email as well. Unfortunately I'm not familiar with every tax program so I can't help. You may need to contact the software company to ask them (but I wouldn't hold my breath on them knowing what you're even talking about). Turbotax has it, but you have a series of boxes to check just right while holding your breath and looking in the right direction to get their program to handle it right and even then it seems to not work right 100% of the time. I'd recommend a professional who knows how to do clergy taxes.
@@IntentionalFinance101 Thanks for your prompt response. I will check into. I've been using H&R Block
Thanks for sharing! As an Interim Pastor, which form would I use to deduct business expenses, mileage, etc...
If you're a 1099 contract and not an employee then you'd report income and expenses on Schedule C. However, most pastors get a W2 (even though they are "self employed") and as a W2 employee you cannot deduct business expenses and mileage. The only option would be if the church reimburses you for those business expenses.
@@IntentionalFinance101 Thank you for your response. Since I'm an Interim Pastor, the church has not given any document for year end compensation. Which would be more beneficial/proper?
@@lwcmoments1049 Interim doesn't really matter... i can't exactly give proper advice through youtube comments... The church needs to reach out to a professional who can properly advise them. If you're an employee they need to do a W2. If you're a contractor then they need to issue 1099-NEC. Both are past the due date at this point.
@@IntentionalFinance101 Okay, thanks again for your time and willingness to answer questions. Your video's are very helpful.
Pastor being paid as self-employed but changes to employee-paid with taxes taken out during the year. Would you discuss how taxes would be prepared for this change in the middle of year?
That can get a little complex as well. Is it with the same employer or a different employer? It's much easier with a different employer. But if you're pastor and then go to a 'normal employee' with the same employer you may get a W2 that has pastoral earnings mixed with 'regular' earnings. That just takes an extra step of some math to get it into the system correctly. If it's two different employers it's much easier.
@@IntentionalFinance101 same employer.
You’ll have to get the breakdown. Perhaps your employer can get that for you. I’ve entered this into the software as two different W2s even though it’s only one. Otherwise it isn’t reported properly
Great video. But what if you get back housing, but your w2 also takes out for Social Security and Medicaid. Example. Make $40k but $10k being housing. So on the W2 it shows $30k for income, ss, and medicaid. Do I just file the $10k for Self employment, since the other $30k had SS and Medicaid already paid for? Thanks in advance.
Thanks for watching! And great question. You should actually get the church/organization to correct it. You should not be qualified to get MHA while also having Soc. Sec. and Medicaid withheld from your paycheck. The only reason that should happen and it be correct is if for part of the year you did not qualify as pastoral staff and then part of the year you did. In which case that should be handled differently. If you were a qualified pastor/minister for MHA for the entire year, the church/organization needs to not only stop doing it the way they are, they need to amend payroll reports, refund taxes withheld to you, and correct the W2.
Are SECA taxes supposed to be paid quarterly or annually?
That's a good question. SECA taxes (for clergy and self employed individuals) are calculated on the personal tax return separately, but just like income taxes. Both SECA and income taxes should be paid in through withholding or through quarterly estimated tax payments. It's possible as a pastor to have withholding from your W2 paycheck which can cover the income and SECA taxes. Or to have withholding from an unrelated W2 job (or spouse's W2 job) be high enough to cover all taxes. It's a little hard to explain... basically, if you do have some withhlding from somewhere covering all taxes owed, you're good. If not, you need to pay estimated taxes quarterly.
What happens if you received a 1099, and not a W-2?
It really depends on the situation... It could be that the church or organization has reported it incorrectly and it should be a W2. Or it could be that it's accurate, in which case you would most likely need to report the income on Sch C.
This is awesome but I got lost 5 mins into the video 😆. I didn’t know my taxes required a lot more work 😳
Pastor taxes are little more complicated than many people think. I tried the make the video as straight forward as possible, perhaps I need to see if there are ways to make it more understandable.
Client is a pastor that changed churches. Church #2 took out social security and medicare taxes out on him. He must have failed to inform then he has opted out. What does one do in a situation like this?
That W2 is wrong either way. Even if a pastor does not opt out of SECA the church is not supposed to withhold soc sec and medicare taxes. They are doing the w2 wrong. Unless he happens to not be in a pastor role with the new church, which seems unlikely, but definitely worth asking.
@@IntentionalFinance101 Thank you. I appreciate the speedy reply during peak!
Can you plz do a current example
Thanks for watching and commenting. Everything in this video is current except for the tax form itself. However, if you're watching and I point out a line, such as taxable income or AGI, it may be a different line number on the new tax form but it will still have the same description. The overall principles are still applicable though.
In this scenario, how would an excess allowance have been reported? Say he was given the MHA of $20k and his actual expenses were $18k. How would he have reported the $2k excess?
Hey Cathy, it gets added to line 1 of form 1040 (where the W2 wages are reported) and off to the left "excess allowance" gets written on the tax return. If the information is entered correctly into any tax reporting software it should do this automatically.
Do spiritual workers that don't have a pastoral license, but are associated with a organization like a church also get the same tax benefits as ministers/pastors 🤔
The main benefit is housing allowance (being treated as self employed I wouldn't really refer to as a benefit :) ). Minister of the gospel is not defined in the tax code that references the housing allowance, but employment tax regulations define what services performed by a minister constitute ministerial services for self-employment tax purposes. Case law and IRS rulings generally deal with whether an individual is considered a minister.
Under the self-employment tax regulations, three types of services are considered ministerial:
(1) the ministration of sacerdotal functions (e.g., baptisms, weddings, funerals, etc.);
(2) the conduct of religious worship, whether or not it is performed for a religious organization; and
(3) the control, conduct, and maintenance of religious organizations (including the religious boards, societies, and other integral agencies of such organizations), under the authority of a religious body constituting a church or church denomination (Reg. Sec. 1.1402(c)-5(b)(2)).
If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister of the gospel.
Hi question is my first time as tax prepared to do taxes for a pastor can I created a w2 line 2 with 0 withholding?
I'm not sure exactly what your question is... It is possible to have a pastor W2 with no withholding in box 2 of the W2.
What if you are a pastor, employed by a church, have a housing allowance, but have numbers in 3-6? Do you still have to pay self employment tax on income and housing allowance? or just housing allowance? or neither??
hmmm... most likely the W2 is wrong. It needs to be brought to the attention of the church staff who handle payroll. perhaps they can correct it, or at least do it right moving forward. it could also be that the employee was a non-pastor employee for part of the year and a pastoral employee for part of the year. it's hard to say without seeing it and knowing the details.
@@IntentionalFinance101 This is my exact scenario. I I was commissioned halfway through the 2021 year. So I have numbers in 3-6 while also needing to submit a housing allowance. Turbotax is asking if I need to pay self-employment tax on my wages and housing allowance, do you know what If I need to pay SE on both my wages and HA or just one of them?
@@jakejohnson7151 Soc Sec and Medicare were withheld up until you became a commissioned pastor. So you do not need to pay SE tax on that portion. The only way I know to get the tax return to be correct is to take the 1 W2 and enter it into the software as if it were 2 W2s. Enter one as a regular employee and one as a pastoral employee. The pastoral employee income may be the difference between box 1 and 5 but it may be different if you had a retirement plan or other pre-tax deductions from your payroll.
Does love offerings from churches and other people outside of church count as income?
The church may give love gifts for four different reasons. Meet a benevolent need, compensate a visiting pastor, compensate an employee, or bless a ministry. Each type of gift has different rules based on the circumstances.
Can the church fill out the W2 for the pastor? I’m new to this where do I download the W2?
The employer (church) is required to provide you with a W2. It has to be provided (mailed out) no later than Jan 31. It's possible if they use a payroll service that it was provided electronically. I would ask the church for a copy if you didn't receive it yet.
Is it a requirement that my Ministers Housing Allowance be stated on the W2 as it is in this video?
It has to be board approved (in the minutes) or leadership approved and documented somehow before it is paid. That’s the requirement. It does not have to be shown on the w2. It can’t be retroactive though and it can’t be informal.
@@IntentionalFinance101 Perfect, that was my understanding but I wanted to be sure. Thanks for the video and prompt reply.
Great video. I am on a W-2 job. I get pay every week for 40 hours. Recently I missed sending my timesheet so I was not paid on time. The employer told me "you will get it retro paid next week".
Next week, I got paid 80 hours (40 hours regular + 40 hours retro). But, There is a Over Tax withholding on payroll because of 80 hours /week. I understand it. The higher amount the higher tax withholding. But, why do they added 40 hours in my regular? That causes to show my salary increased as doubled. They are supposed to send a separated check for the missing. It is a missing 40 hours. it is not a promotion, it is not a raise or overtime. When I talked to employer they just keep saying its correct. There is no mistake. Please advise me. thank you
If I understand correctly you were paid the correct amount as gross salary (2x a normal week). You were NOT paid 1.5x overtime pay for "extra" 40 hours. However, you tax withholding was not 2x the normal withholding, it was more than that? The withholding table looks at frequency of pay and amount paid during the pay period. So it does make sense if they just added it on top that the withholding would have been more than simply 2x the normal withholding. It was an automatic calculation in their payroll software I'm sure. There was probably a way to avoid it, but now it's already been withheld.
@@bradw935 thanks for your reply. Yes they took more tax as usual. For instance on my weekly payroll my federal tax is $300 per week. I missed a week. so on next week they paid myfor 80hours then then took $800 tax from my paycheck. so I lost $200. in next week it back to normal as usual. because my salary is fix no change at all. but we should I lost $200 for they mistake. How ahould I ask them to fix it? They should calculate the missing 40hours as a separated check and withdraw $300 as usual. Am I right?
@@kevinnaj1518 That could've been done I believe. But now they've already withheld it and remitted it to the IRS. They could withhold $100 from your next check to make up the $200 difference, but it'd have to been done manually somehow in their payroll system. Otherwise, you just have to wait until you file your tax return next year.
@@IntentionalFinance101 Right. I know they dont want to fix it. Because they keep saying the payroll is correct. It may happen someone forgets to send to send timesheet ontime but they should not pay in that way as retro pay. Am I right?. So what should I say to them for next time as payroll terms? Sending separate check for missing payment?
I’m sorry, there’s not really much I can do for you. It’s up to your company and their policies. Sounds like you’ve tried and you’re out of luck. As far as what to say next time, my main recommendation would be not to forget to submit your timesheet since you now know how they handle it.
Please work on your audio. It's very feeble
Thanks for watching David. Some of my earlier videos did have some poor audio. I’ll try to go back through sometime and redo them.
@@IntentionalFinance101 thanks so much. Helpful videos