Is housing allowance included on the W2 in box 3 and 5?

by Necole
(Arkansas)

Our pastor receives a housing allowance and I need to know where to properly enter it on the W2.

Now I know that it doesn't go in box 1 but I am new to the financial staff and I have seen previous W2s, where the income was entered in box 1 but the income and the housing allowance amount was entered in box 3 and 5.

The housing allowance was also entered in box 14.

I need to know if your pastor has social security and medicare taxes withheld from his income then do you only report your taxable income in box 3 and 5 or do you also include your housing in these boxes as well?

Comments for Is housing allowance included on the W2 in box 3 and 5?

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SECA vs FICA
by: Vickey

It is my understanding that a pastor must pay his own Social Security and Medicare by filing a schedule SE with his income tax forms. Also his housing allowance is to be included with his salary as far as figuring Social Security and Medicare amounts due. This would mean that his taxable salary would be noted in box 1 and his housing allowance, gifts etc would be added to this figure and put in box 3. If you do not do this the amount being sent to Social Security as SSwages will be understated which will affect his Social security benefits at retirement. Please tell me if I am wrong.

You are right on your first statement, wrong on the rest :-)

There are 2 systems that taxpayers pay and Social security and Medicare taxes are collected on their earnings: FICA and SECA.

Under the Insurance Contributions Act (FICA), the employee and the employer each pay half of the taxes and their earning are reported in box 3 and 5 on a W-2.

Under the Self-Employment Contributions Act (SECA), the self-employed person and ministers pay all the taxes and their earnings are reported (for Social Security purposes) on a Schedule SE in their personal income tax forms.
Important: Box 3, 4, 5, and 6 are all left blank on a qualifying minister's W-2.

No earnings are subject to both systems.

See this post on FICA taxes.

Read the IRS’s Pub 517.
http://www.irs.gov/pub/irs-pdf/p517.pdf

Check your annual Social Security history statement to make sure your earnings are being properly recorded.
Social Security and Medicare for Pastors filing Sched SE
by: Anonymous

It is my understanding that a pastor must pay his own Social Security and Medicare by filing a schedule SE with his income tax forms. Also his housing allowance is to be included with his salary as far as figuring Social Security and Medicare amounts due. This would mean that his taxable salary would be noted in box 1 and his housing allowance, gifts etc would be added to this figure and put in box 3. If you do not do this the amount being sent to Social Security as SSwages will be understated which will affect his Social security benefits at retirement. Pleas tell me if I am wrong.
Housing Allowance Can be Recorded in Box 14
by: Vickey

No.

A qualifying minister's housing allowance is recorded in box 14 only.

Let me point out something first though...housing allowances are available to dual-status ministers only.

"Dual Status" is what the IRS considers ministers who pass their 5 point test. They are considered an employee of the church for federal income purposes and self-employed for Social Security and Medicare purposes. The church does not withhold or match Social Security and Medicare taxes on a qualified minister.

See this page for more details.

So if your pastor does not meet the IRS's definition of a qualifying minister...he is not eligible for a housing allowance. (However, a pastor usually always meets the tests of a qualifying minister.)

If he does meet the qualifications, then you will record his income in box 1 and 16 if state taxes apply and his housing allowance in box 14. Unless he requested voluntary income tax withholding, you will leave all of the rest of the boxes blank.

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