also on the church topic - Can minister/ CEO of corp be self-empd?

[schirallicpa]

In corp world, any active director of the corp - CEO - gets a paycheck. If the minister is the Pres/ CEO of the church, should he be on the payroll. The lawyers that did the 501c3 work advised him to be self-employed to take advantage of clergy housing benefits. I'm wondering if he should get a paycheck as officer, and then get 1099 for ministry work.

Frankly, of all the priests and pastors that I have done in the past, they have always just gotten a paycheck because they had previously decided the housing allowance wasn't worth the time.

Any thought on that?

[OldJack]

A housing allowance is a benefit that is in addition to any taxable salary. Obviously the lawyer should stick to law work and not tax work. Housing allowance can be significant to a minister especially if he is buying his home for retirement.

[Jack from Ohio]

The church needs to get the governing body and the treasurer some training and education to how church taxes and ministerial payroll is properly handled.

The things you mention indicate gaps in the knowledge needed to do it correctly.

[JohnH]

Given that the lawyer is dispensing such low-quality tax advice, the church may want to have a knowledgeable lawyer review all the work he did for the orgnization and scrutinize it for other serious flaws. I'd be concerned that his legal exerptise might be as defective as his tax knowledge.

[jainen]

>>the lawyer is dispensing such low-quality tax advice<<

I wouldn't be so quick to blame the LAWYER. In my experience, it is more likely the CLIENT heard several important points and rearranged them himself, either in confusion or otherwise. In fact, a minister IS self-employed by definition relating to self-employment tax. And the housing allowance IS an important benefit with a specific relationship to self employment tax separate from wages.

On the other hand, why is an ACCOUNTANT asking if the chief executive officer should be paid on a 1099? Sorry, but from the description of other clients, THAT sounds to me like the source of the idea that a housing allowance is not available to an employee.

[MAMalody]

In corp world, any active director of the corp - CEO - gets a paycheck. If the minister is the Pres/ CEO of the church, should he be on the payroll. The lawyers that did the 501c3 work advised him to be self-employed to take advantage of clergy housing benefits. I'm wondering if he should get a paycheck as officer, and then get 1099 for ministry work.

Frankly, of all the priests and pastors that I have done in the past, they have always just gotten a paycheck because they had previously decided the housing allowance wasn't worth the time.

Any thought on that?

Generally, most pastors have the role of CEO for the church. Many are even so designated in the constitution or by-laws. Pastors are generally consider to be common law employees for income tax purposes, therefore requiring a W-2. They are considered self-employed for FICA/MC purposes. Therefore, they are subject to the SE tax (if they have not been exempted from the system on clergy income). Whether they receive a W-2 or 1099, theyor would, generally, be eligible for a housing allowance.

I would suggest that you review your clergy returns. You may easily find that most of them would receive a income tax benefit for having a housing allowance. I have seen very few case where it has not been a benefit. Unless they do not have a taxable income, the housing allowance will be a benefit to them. JMHO.