New Pastor of a Church

[Yardley CPA]

I have a new client who came to me for the first time last year and I prepared their federal and Pennsylvania returns.  Husband and wife who filed MFJ with no children and standard deduction. Straight forward return as both husband and wife were W2 employees in corporate America.  I received an email this year that the couple moved in the middle of 2014 (from Pennsylvania to North Carolina) as the husband obtained his first pastor position of a church.  I've been told that the husband will receive a 1099 form from the church and he does receive a housing allowance. I have never completed a tax return for any type of clergy in my 25 years in the business.    Can anyone provide me with a general understanding of what tax benefits clergy have and where I can go to find out more information?

 

I would appreciate any insight you can provide.  Thanks very much!

[Jack from Ohio]

I have a new client who came to me for the first time last year and I prepared their federal and Pennsylvania returns.  Husband and wife who filed MFJ with no children and standard deduction. Straight forward return as both husband and wife were W2 employees in corporate America.  I received an email this year that the couple moved in the middle of 2014 (from Pennsylvania to North Carolina) as the husband obtained his first pastor position of a church.  I've been told that the husband will receive a 1099 form from the church and he does receive a housing allowance. I have never completed a tax return for any type of clergy in my 25 years in the business.    Can anyone provide me with a general understanding of what tax benefits clergy have and where I can go to find out more information?

 

I would appreciate any insight you can provide.  Thanks very much!

Too much information to share here.  I have several clergy clients and notice a couple of glaring things.

 

1.  The church is to issue ONLY a W-2 for the pastor.  No other method is correct. 

2.  Housing allowance must be treated in several specific ways by the church.  Most church treasurers/secretaries do not understand the proper methods of payroll or housing allowance for clergy.

 

I am a distance from you, but would be willing to talk to the new pastor AND the church treasurer.  Clergy taxes are not difficult, just different.

[rfassett]

Clergy and Church tax law is, as Jack states, different but not necessarily difficult.  If you are going to go down this path, I would suggest you get a copy of the Richard R Hammar's Church and Clergy Tax Guide.  I don't disagree with Jack about the W-2 / 1099 issue, but the fact remains, many Churches still do the 1099 thing.  You will need to counsel your Pastor client to get his Church on board with doing it right.  He is in a very good position to steer that ship.  Clergy law, again, is very different and just cannot be addressed in this small a space.  I have about twenty or so Pastor's and Churches that we do work for.

 

Good luck!  But for starters, google Hammar and his book.  It is the bible of the clergy and church tax world.  (Every pun intended.)

[Lion EA]

There are some good books.  Hammer writes one.  But, if his church is part of a mainstream denomination, then his national church or regional governing body probably has an excellent manual (even if his church is not following it !!).  Do talk with one of our members who does clergy taxes.  It's a hybrid, and backwards from the statutory employee hybrid, where he's an employee but self-employed for FICA/Med purposes.  That's why some churches prepare 1040s; on a W-2 only Box 1 has to be filled in.  You also need detail on the housing allowance, minutes from the meeting/employment contract/letter of agreement as that is not income for income tax purposes but is income for SE tax purposes.

[jklcpa]

Beyond what's already been said, if I needed specific help from someone on clergy issues, the member on here that I would contact would be MAMalody. His entire practice is clergy work and nothing else.
 
Here is a >great thread where he talks about parsonage, see post #6 in that topic and maybe that will help you some too.

[Terry D EA]

I agree with Judy that MAMalody is the resource. However, I am in NC and have done a few clergy returns. If I can be of any assistance I would be happy to do so.

[BulldogTom]

Yardley,

 

Run, as fast as you can, to take these offers up to help you out.  The type of free training they are offering you is priceless. 

 

There are many pitfalls to doing clergy returns.  They are usually very rewarding to do if you are in to helping out people who are generally good folks, but just care more about their profession and faith than they do about the government and taxes.

 

If you don't want to read a whole book, GuideStone Financial Resources out of Dallas TX (Southern Baptist Affiliation) has an excellent web page called "Minister's Tax Guide".  Use this as an overview of the whole clergy tax system.  It is written as if the clergy member is reading it.  It is the best I have seen out there.  Richard Hammer writes this for GuideStone.

 

Good Luck.  There is a lot of help out there for you.  I suggest you take advantage.

 

And Mike Malody is a first rate guy.  I have received great advice from him in the past.  If he is willing to offer his time for you, I strongly suggest you take him up on it.

 

Tom

Newark, CA

Edited January 17, 2015 by BulldogTom

[Yardley CPA]

Thanks to everyone for your feedback and offers to help.  Very much appreciated.

[MAMalody]

I appreciate those kind words and, of course, would be willing to help in any way that I can. I, along with others, would be more than happy to respond to any posted question.  If you want to contact me directly, you can do so at [email protected].  Be advised that if you do contact me directly you will lose the benefit of peer review that this message board provides.

[kcjenkins]

I will only add that the pastor's denomination can make a difference.  Many Pentecostal churches do issue 1099's because of how they structure their relationship with pastors.   By all means, google the denomination for a link to how they advise their pastors.