One of the most confusing parts of running any business is handling payroll. For a house of worship, the confusion is magnified when pastors are involved. Suddenly, in addition to your standard employees, you’re dealing with “dual status” employees and housing allowances.
Perhaps you’ve been wondering
- What does “dual status” mean?
- Who can be considered a pastor?
- Should I report pastor compensation on a W2 or a 1099?
- How do we determine a housing allowance?
- Can our church withhold taxes for our pastor?
Join House of Worship accounting and QuickBooks experts Barbara Starley, CPA,, and Gregg S. Bossen, CPA, in this high-demand webinar.
In this webinar we are going to cover
- Similarities and differences between pastors and standard employees
- The definition and qualifications of a “dual status” employee
- How to report pastor compensation to the IRS
- Best practices for determining, paying, and reporting housing allowances
- Typical concerns and misconceptions about withholding taxes
5. Presenters:
Barbara L. Starley, CPA
Gregg S. Bossen, CPA
Hashtag #QBME
Twitter:
@QBMadeEasy
@GreggBossen
@BarbaraStarley
QUICKBOOKS® FOR
HOUSES OF WORSHIP: UNDERSTANDING PASTOR
PAYROLL
WELCOME TO THE SHOW!!! WE WILL START AT 2:02PM EDT (11:02AM PDT) YOU
SHOULD BE HEARING MUSIC ☺ ☺ ☺
@2020 Barbara L Starley, CPA
6. QuickBooks Made Easy for Houses of Worship Webinar
About Our Instructors
Gregg Bossen, CPA
• Certified Advanced QuickBooks ProAdvisor®
• Specializes in Industry Specific Training
• Author of QuickBooks® Made Easy™ for Nonprofits
• National Trainer – seminars around the country
QuickBooks Made Easy™ for Nonprofits
Atlanta, GA
www.quickbooksmadeeasy.com
Barbara L. Starley, CPA
• QuickBooks ProAdvisor®
• Best-Selling Author
– Your Amazing Itty Bitty QuickBooks books
• On-Call Controller
• Founder - Good Steward Church Academy®
• Barbara@BarbaraStarley.com
@2020 Barbara L Starley, CPA
7. What We Do
❑ On Demand Training – STREAMABLE
❑ Nonprofit QB Tech Support
❑ Live Seminars/Webinars across the country
Train & Support Nonprofits using QuickBooks
QuickBooks Made Easy for Houses of Worship Webinar
@2020 Barbara L Starley, CPA
8. QuickBooks Made Easy for Houses of Worship Webinar
Special Offer!
Ends 11/28/2020 at 11:59PM PST
@2020 Barbara L Starley, CPA
⮚Tech Support for 1 Year $299
One Year of Unlimited Technical Support with Our Team
of QuickBooks ProAdvisor Certified CPAs and Accountants
Code: TSHOW200
Normally: $499.00
9. @2020 Barbara L Starley, CPA
QuickBooks Made Easy for Houses of Worship Webinar
Upcoming Webinars
PPP Forgiveness and Payroll During Year-End for Your Nonprofit (with TechSoup)
December 15th (Tues @ 2pm-3:30pm EDT)
Free
https://bit.ly/39fvFbZ
QuickBooks for Houses of Worship: 2 Day Webinar Series
January 19th and 20th (Tues-Wed @ 2pm-4pm EDT)
$159 with Code TSHOW30 (regularly $189)
https://bit.ly/3789AJG
Getting Your 2020 1099's Out of QuickBooks Desktop
January 13th (Wed @ 2pm-3:30pm EDT)
$59 with Code TSHOW40 (regularly $99)
https://bit.ly/3615Iee
Getting Your 2020 1099's Out of QuickBooks Online
January 14th (Thu @ 2pm-3:30pm EDT)
$59 with Code TSHOW40 (regularly $99)
https://bit.ly/33ej6tM
10. QuickBooks Made Easy for Houses of Worship Webinar
Pastor Payroll – Agenda
• Classification of Workers in Houses of Worship
• Who can be a Pastor?
• What does “dual status” mean?
• Housing Allowances
• Reporting Pastor Compensation
• Concerns & Misconceptions about Taxes
@2020 Barbara L Starley, CPA
12. QuickBooks Made Easy for Houses of Worship Webinar
3 Key Factors = Employee Status
@2020 Barbara L Starley, CPA
13. Classification of Workers
Employees Non-Employees
https://www.irs.gov/pub/irs-pdf/f1099nec.pdf
https://www.irs.gov/pub/irs-pdf/fw2.pdf
QuickBooks Made Easy for Houses of Worship Webinar
@2020 Barbara L Starley, CPA
14. Who is a
Pastor?
• Licensed, commissioned, or ordained
minister
• Common law employee of a religious body
• Employed to provide ministerial services
– Ministration of sacerdotal functions
– Conduct of religious worship
– Control, conduct, and maintenance of organizations
https://www.irs.gov/pub/irs-utl/ministers.pdf
QuickBooks Made Easy for Houses of Worship Webinar
@2020 Barbara L Starley, CPA
15. What does
“dual status”
mean?
• Status of employee for federal income tax
purposes
• Status of self-employed for Social Security
& Medicare purposes
QuickBooks Made Easy for Houses of Worship Webinar
@2020 Barbara L Starley, CPA
16. Which form should a
Pastor receive?
QuickBooks Made Easy for Houses of Worship Webinar
@2020 Barbara L Starley, CPA
17. QuickBooks Made Easy for Houses of Worship Webinar
Pastor Compensation
Housing
Benefits
Salary
Excluded from federal (and
most state) income tax; but
subject to SE tax
MAY be taxable for both income
tax and SE tax
Included in income
for income tax and SE tax
@2020 Barbara L Starley, CPA
18. QuickBooks Made Easy for Houses of Worship Webinar
Housing Allowances
A minister's housing allowance
(sometimes called a parsonage allowance or a rental allowance)
is excludable from gross income
for income tax purposes
but NOT excludable
for self-employment tax purposes.
https://www.irs.gov/faqs/interest-dividends-other-types-of-income/ministers-compensation-housing-allowance/ministers-compensation-housing-allowance
@2020 Barbara L Starley, CPA
19. The Lesser of Three
BoardDesignated
FairRentalValue
ActualExpenses
Mortgage Principal
& Interest
RE Taxes
Home/Renter
Insurance
HOA Fees
Utilities
Repairs
Yard Maintenance
Furniture
Appliances
Down Pmt in Yr of
Purchase
Furnished
Utilities
Dollar Amount
or
Percentage of
Income
QuickBooks Made Easy for Houses of Worship Webinar
@2020 Barbara L Starley, CPA
20. REMINDERS
• Housing Allowances must be:
– Formally designated and recorded in
advance
– May not be established or changed
retroactively
@2020 Barbara L Starley, CPA
QuickBooks Made Easy for Houses of Worship Webinar
21. QuickBooks Made Easy for Houses of Worship Webinar
Exception to Housing Exclusion
If your housing allowance
exceeds the lesser of
your reasonable compensation,
the fair rental value of the home,
or your actual expenses directly relating to providing the home,
you must include the
amount of the excess in income.
https://www.irs.gov/taxtopics/tc417
Note: It is ultimately the Pastor’s responsibility to determine any
excess housing allowance.@2020 Barbara L Starley, CPA
22. Pastor’s W2
Boxes 3, 4, 5 & 6 = Blank (or $0)
for pastors
Box 1 = Total Compensation,
NOT including housing allowance
QuickBooks Made Easy for Houses of Worship Webinar
Box 14 = Housing Allowance
Box 16 = Generally the same as Box 1, unless housing allowance is
taxable for state income taxes
Name & Address of House of Worship
Name & Address of Pastor
Year
@2020 Barbara L Starley, CPA
23. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
24. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
Cash &
Gift Cards
25. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
Cash &
Gift Cards
Reimbursed
FICA/Ins
26. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
Cash &
Gift Cards
Reimbursed
FICA/Pers Ins
Non-Accountable
Allowances
27. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
Cash &
Gift Cards
Reimbursed
FICA/Pers Ins
Honorariums
Non-Accountable
Allowances
28. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
Cash &
Gift Cards
Reimbursed
FICA/Pers Ins
Pastor Appreciation
Love Offerings
Honorariums
Non-Accountable
Allowances
Des
Fund
29. QuickBooks Made Easy for Houses of Worship Webinar
What is included in Box 1 income?
@2020 Barbara L Starley, CPA
Salary &
Bonuses
Cash &
Gift Cards
Reimbursed
FICA/Pers Ins
Pastor Appreciation
Love Offerings
Honorariums
Non-Accountable
Allowances
Des
Fund
30. QuickBooks Made Easy for Houses of Worship Webinar
“Fund Buckets™”
@2020 Barbara L Starley, CPA
31. Does Your House of Worship
collect designated/restricted funds?
@2020 Barbara L Starley, CPA
QuickBooks Made Easy for Houses of Worship Webinar
32. Can a Pastor have taxes withheld?
QuickBooks Made Easy for Houses of Worship Webinar
States have a similar form that will allow
Pastors to withhold state taxes as well.
@2020 Barbara L Starley, CPA
33. • Pastor Compensation:
• Base Salary
• Clergy Housing (cash)
Typical QBO Set-up for Pastor
Note:
Clergy Housing (In-Kind) = Church Provided
QuickBooks Made Easy for Houses of Worship Webinar
34. Claiming an
Exemption
from SE Tax
• You can request an exemption from self-employment tax for your
ministerial earnings, if you're opposed to certain public insurance for
religious or conscientious reasons.
• You can't request exemption for economic reasons.
• To request the exemption, file Form 4361 with the IRS.
• You must file it by the due date of your income tax return (including
extensions) for the second tax year in which you have net earnings from
self-employment of at least $400.
• This rule applies if any part of your net earnings from each of the two
years came from the performance of ministerial services.
• The two years don't have to be consecutive.
• The exemption is granted if IRS approves your application.
• Once granted, the exemption is irrevocable.
@2020 Barbara L Starley, CPA https://www.irs.gov/taxtopics/tc417
QuickBooks Made Easy for Houses of Worship Webinar
Form 4361
35. Under Penalties of Perjury
A pastor can only opt out if he can truthfully state:
“I am consciously opposed to,
or because of my religious principles
I am opposed to,
the acceptance of any public insurance
that makes payments in the event of death, disability, old age, or retirement;
or that makes payments towards the cost of, or provides services for, medical
care.”
Form 4361
@2020 Barbara L Starley, CPA https://pcarbi.org/pastors-social-security/
QuickBooks Made Easy for Houses of Worship Webinar
36. Form 4361
This form creates an IRREVOCABLE election between the Pastor & the IRS. Covers only church income.
Conscientiously opposed to:
• Social Security (OASDI)
• Medicare/Medicaid
• TANF/Temporary Assistance for Needy
Families
• SNAP/Food Stamps
• WIC/Women, Infants & Child Welfare
QuickBooks Made Easy for Houses of Worship Webinar
37. Useful Resources
Ministers Audit Techniques Guide
https://www.irs.gov/pub/irs-utl/ministers.pdf
Publication 517
https://www.irs.gov/pub/irs-pdf/p517.pdf
@2020 Barbara L Starley, CPA
QuickBooks Made Easy for Houses of Worship Webinar
38. QuickBooks Made Easy for Houses of Worship Webinar
QuickBooks for Houses of Worship
2-Day Training
January 19-20, 2021
@2020 Barbara L Starley, CPA
In this 2-day event, we are going to be covering:
✔ How to setup your chart of accounts to create useful reports
✔ Shortcuts to streamline your data entry & reporting processes
✔ How to easily track ministry expenses & create accountability
✔ When to use bank feeds – and when you shouldn’t
✔ How to handle donor-designated and donor-restricted funds
$159 with code TSHOW30 (regularly $189)
https://bit.ly/3789AJG
39. QuickBooks Made Easy for Houses of Worship Webinar
Getting Your 2020 1099’s Out of QuickBooks
Desktop Users: 1/13/2021 and Online Users: 1/14/2021
@2020 Barbara L Starley, CPA
In this 90 minute event, we are going to be covering:
✔ Step by step set up walk thru
✔ Setting up vendors
✔ Telling QuickBooks which transactions go on the 1099
✔ Review 1099 info before creating
✔ Adjusting a 1099 amount to correct the total
✔ Creating and sending 1099’s to contractors
✔ Reporting 1099’s to the IRS with the 1096 cover sheet
$59 with code TSHOW40 (regularly $99)
Desktop Users: https://bit.ly/3615Iee
Online Users: https://bit.ly/33ej6tM
40. QuickBooks Made Easy for Houses of Worship Webinar
Special Offer!
Ends 11/28/2020 at 11:59PM PST
@2020 Barbara L Starley, CPA
⮚Tech Support for 1 Year $299
One Year of Unlimited Technical Support with Our Team
of QuickBooks ProAdvisor Certified CPAs and Accountants
Code: TSHOW200
Normally: $499.00
41. @2020 Barbara L Starley, CPA
QuickBooks Made Easy for Houses of Worship Webinar
Upcoming Webinars
PPP Forgiveness and Payroll During Year-End for Your Nonprofit (with TechSoup)
December 15th (Tues @ 2pm-3:30pm EDT)
Free
https://bit.ly/39fvFbZ
QuickBooks for Houses of Worship: 2 Day Webinar Series
January 19th and 20th (Tues-Wed @ 2pm-4pm EDT)
$159 with Code TSHOW30 (regularly $189)
https://bit.ly/3789AJG
Getting Your 2020 1099's Out of QuickBooks Desktop
January 13th (Wed @ 2pm-3:30pm EDT)
$59 with Code TSHOW40 (regularly $99)
https://bit.ly/3615Iee
Getting Your 2020 1099's Out of QuickBooks Online
January 14th (Thu @ 2pm-3:30pm EDT)
$59 with Code TSHOW40 (regularly $99)
https://bit.ly/33ej6tM
42. Get Social Use Hashtag #QBME
Twitter: @QBMadeEasy
@GreggBossen
QuickBooks Made Easy for Houses of Worship Webinar
Thank You!
Presenters:
Barbara Starley, CPA
Gregg S. Bossen, CPA
@2020 Barbara L Starley, CPA
46. Join Us For Upcoming
TechSoup Virtual Events
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Why Nonprofits Must
Optimize the Year-End
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12/10
Service Design for All:
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12/15
PPP Forgiveness and Payroll
During Year-End for Your
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