W2 has nothing in box 14 and the IRS accepted my opt out, do I still have to report my housing allowance?

by Carole
(Brighton, MI)

My son-in-law is a minister that's been approved for opting out by the IRS. As the preparer of their taxes, I want to make sure I understand how to correctly prepare their return. His w2 shows box 1 wages only and nothing in box 14. He does not get a separate letter either stating his housing allowance. Does that mean he does not have to report or pay SE taxes on his housing allowance?

Comments for W2 has nothing in box 14 and the IRS accepted my opt out, do I still have to report my housing allowance?

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Box 14
by: Anonymous

The HA must be designated by the church in writing as part of the annual business meeting notes.

As I shared above, the pastor receives a salary of $35,000 and his church agrees that $15,000 of this designated as housing allowance.

If he only used $10,000 then $5,000 of this is now taxable.
reporting HA
by: Lewis in NC

I agree with you and your CPA/Accountant; I believe in all clarity it should go in Box 14 on the W-2.

It is the clergy's responsibility to report any unused HA as income for taxation however. If he/she is audited for HA questions, their receipts for housing would be required and a letter from the church with HA on it, or a W-2 with box 14 filled in with HA noted.
Box 14
by: Anonymous

Lewis in NC,

If the amount of the HA is not placed in 14,
and his salary is $35K, how then is the unused portion of the HA reported?

It becomes taxable income at that point and ought to have been already stated on the W2.

This is how my CPA explained it to me according to IRS standards.

Clergy option not to participate in SS. . .
by: Lewis in NC

When clergy chooses not to pay into the Social Security Program, it is this writers hopes that they are using all those funds that would be required of them and placing them in some government approved retirement program for their futures, because it would be a grave mistake otherwise.

But, to answer your question, yes that (what you said) is what it means. However, the church is required to send a letter to him officially informing him of the housing allowance amount, and he should require them to do this. The housing allowance should have been excluded in Box 1 of the W-2, and it doesn't have to be placed in Box 14 though that is a church option.
Housing allowance
by: Anonymous

Clergy tax is funny. You have to be careful to follow the rules.
It's best to have a CPA who is a believer to do the work.
That stated...
Here's my experience.
Everything on line one is taxable.
If there is an amount out of salary stated by the church as "housing allowance" it will be deducted from the salary and Pitt on line 14.
Example:
Joe's salary is $35,000.00 annually.
The church and he set the "housing allowance" at $15,000.00.
Line one is: $20,000,00; line 14: $15,000.00.

It will then be determined by Joe how much of the allowance was used. I keep all receipts related to these expenses.
Go to the IRS site and read their material the pertains to the housing allowance to know how they view it.

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