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carmichaels1
January 8, 2024
Question

Clergy housing (cash) vs Clergy housing (in kind)

  • January 8, 2024
  • 1 reply
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We are trying to set up our pastor's payroll and he gets a housing allowance per pay and he also has a housing exclusion of a greater amount.  The housing allowance is money we are giving him in addition to his salary since we are not providing a parsonage.    The housing exclusion is money that was voted on to be excluded from income to reduce his taxable salary.  We are having difficulty figuring out what payroll items to use for each of these so that they show up correctly on his W2 at the end of the year.    We feel like it makes sense from the descriptions to use Clergy housing (cash) for the allowance portion as this is in addition to his salary.  However, we are unsure where to account for the portion of his salary that has been designated as the housing exclusion.  

Thank you.  

    1 reply

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    CamelleT
    January 8, 2024

    I'll help you set up your pastor's payroll, michael.

     

    Regarding the housing allowance, you'll need to use the Clergy Housing (Cash) for this since you provide funds to them. Then, use the Clergy Housing (In-Kind) for the designated housing exclusion. 

     

    Here's how to set up the clergy housing items:

     

    1. Go to Payroll and choose Employees.
    2. Click the pastor's name, then hit Edit beside the Pay types section.
    3. Select the Additional pay types dropdown, then tick the Clergy Housing (In-Kind) or Clergy Housing (Cash) checkbox.
    4. Enter the amount for both and Hit Save.

     

    You can also check out this article for further information: Set up clergy on payroll.

     

    Additionally, I'll add this link to help you create, manage, assign, and update pay schedules for QuickBooks Online (QBO) Payroll: Set up and manage payroll schedules.

     

    I'm here to back you up if you need further assistance setting up clergy. Just comment below. Have a great day!

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    carmichaels1Author
    January 9, 2024

    Thank you for your response.  Just a follow up question.  So just looking at the housing exclusion portion which we will be including under the Clergy housing (in-kind) as you suggested.  So, say for example, we have set a pastor salary at $52,000 a year and our church has stated 50% of that salary can be used as a housing exclusion and we pay every 2 weeks (so 26 pays per year). 

      So when I am inputting his information into Quickbooks Online in the Pay type section, which of these options would I do to have the correct info on the W2 at the end of the year?     

    (1) Enter Salary as $52,000 and then in the Clergy housing (in kind) recurring payment section we would put $1000 because we want $1000 of his Salary to be allocated for the housing exclusion each pay 

    OR

    (2) Enter Salary as $26,000 and then in the Clergy housing (in kind) recurring payment section we would put $1000 because we want $1000 of his Salary to be allocated for the housing exclusion each pay

     

    Which option would result in half of his salary ($26,000) showing up as taxable income in box 1 of the W2 and the other $26,000 showing up in Box 14 of the W2 for the exclusion at year end?  We weren't sure if it pulls the exclusion automatically from the original salary of $52,000 or if we have to basically exclude it manually?

     

    In addition, we are still unsure if we are going to include the housing allowance money that he gets extra in payroll or just give him a separate check.  But if we opt to include it, say in addition to his $52,000 salary we are giving him a housing allowance of (extra money) totaling $200 per pay. 

     

    Would we just put the $52,000 in the Salary section and then the $200 in the Clergy housing (cash)?

     

    I wasn't sure if both the Clergy housing (cash) and Clergy housing (in hand) in QB online are both set up to not be taxed for federal income tax.  

    We just want to make sure that in this example that only $26,000 shows up in W2 box 1 and the other $26,000 (for the housing exclusion) and the $5,200 ($200 x 26 pays - for the housing allowance) both show up in Box 14.  

     

    Thanks in advance.  

     

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      TabethaWyatt
      January 22, 2024

      Did you ever find out the answer to this question? Whether it be option 1 or option 2? 

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