Clergy Housing Allowance - No W2

[jasdlm]

Client has an email stating 'your housing allowance for 2021 was $25,000'.  No W2.  The organization said 'we don't do W2s'.

Is this a thing?  I do about a dozen clergy returns, but I haven't ever done one without a W2.

Thanks so much!

[jasdlm]

Sorry.  Incomplete information.  No 1099, either.  I understand that there doesn't have to be a W2, but there is nothing.  I guess I shouldn't worry about it?  Just report the housing allowance and roll on down the road?

 

[Medlin Software, Dennis]

Experts in that area say HA should be documented twice a year. Once to award, and at EOY. Letterhead suffices.

I say nothing on a tax doc unless required, so no HA on a 1099 or W2, since there is no such requirement to do so. 

[Margaret CPA in OH]

My Church and Clergy Tax Guide resource states that, if paid $600 or more, a non-employee must receive a 1099-NEC (used to be 1099-MISC).  I haven't looked to see the instructions for the 1099-NEC if there is a way to indicate HA as there is in Box 14 on a W-2.  All minister returns I've done and W-2's prepared for ministers when I managed the church payroll for several years, showed wages in Box 1 and HA.  Most had FWH and SWH for their convenience but, of course, filed as self-employed and paid SE tax on both wages and HA.

[Medlin Software, Dennis]

You can put anything in W2 box 14, but there is no requirement to put HA there.  Cleanest is letterhead, once when "hired" (has to be documented in advance) then annually at EOY (restating the next year's amount, and listing the year closing's amount).

Whether or not the clergy person receives remuneration triggering 1099 or W2 is immaterial to HA (some may get HA as a retirement bene, for instance, or receive other income via direct gifts, or no other pay at all).

For tax prep, you likely have a good idea of what reasonable and allowed housing costs are in your area, and can inquire deeper if the amount seems excessive.  I would prefer not to have to rely on an email (as mentioned in the OP) for audit, but letterhead is acceptable. Even those who use Box 14, that alone will fail audit, since there must be documentation showing the planned HA in advance of receipt of the money.

I cannot remember an exact reference, but there is at least one great independent resource for clergy/church accounting.  I would not reply only on the denomination provided information.  Sometimes the denomination is mistaken, or too risky with their advice.

[Lion EA]

Worth. Geisler.