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W-2 Instructions

By the end of January, the church treasurer must provide an IRS Form W-2 to the pastor and any other staff member of the church. On the other hand, IRS Form 1099s are provided to “ independent contractors,” such as evangelists. Completing the IRS Form W-2 should be relatively simple for the church treasurer. Step-by-step instructions and tips follow:

  • Box a – list the employee or minister’s Social Security number
  • Box b – list the employer/church’s IRS identification number. Every church should have an Employer Identification Number (EIN). If not, the church treasurer on behalf of the church may obtain an EIN by completing IRS Form SS-4 or by applying on-line for an EIN number at www.irs.gov.
  • Box c – list the name and address of the employer/church
  • Box d – nothing goes in this box generally
  • Box e – list the name of the employee or minister
  • Box f – list the address of the employee or minister
  • Box 1 – list all reportable taxable income for the employee or minister (do not include employer/church retirement plan contributions, amounts reduced from the employee or minister’s salary through a valid salary reduction agreement, or ministerial parsonage/housing allowance).
  • Box 2 – if the minister voluntarily requested that federal income taxes be withheld from his taxable compensation, including additional amounts to cover his Social Security tax liability, then list those amounts here. If there was no voluntary withholding agreement, nothing should appear in Box 2 of the minister’s Form W-2. Of course, all Federal income tax withheld from an employee’s compensation should be listed here.
  • Box 3 through Box 6 – nothing appears in these boxes for ministers.
  • Box 3 – for employees, the amount of compensation subject to Social Security appears here. The church treasurer should be aware that the “cap” amount subject to Social Security adjusts each year based upon inflation. The treasurer should also be aware that while salary reduction amounts withheld from a minister’s income are not taxable for income tax purposes or Social Security tax purposes, salary reduction contributions for non-ministers are taxable for Social Security purposes but are not taxable for federal income tax purposes.
  • Box 4 – for employees, the amount of Social Security tax withheld appears here.
  • Box 5 – for employees, the amount of compensation subject to the Medicare tax appears here. There is currently no cap on how much compensation can be taxed for Medicare purposes.
  • Box 6 – for employees, the amount of Medicare tax withheld appears here.
  • Box 7 through Box 11 – nothing generally appears in these boxes for ministers or employees in a church setting.
  • Box 12 – use the following codes and state the amount (additional codes may be applicable):
    • C – Reports cost of group term life insurance benefits in excess of $50,000 paid by the employer/church
    • E – Reports amounts contributed to a 403(b) retirement plan (like the Board of Retirement Plan) by salary reduction from the employee. Please note that retirement plan contributions made by the employer are not reported anywhere on the IRS Form W-2.
    • P – Reports qualified moving expenses reimbursed to the minister or employee. If the employer/church pays the moving company directly, those costs are not reported on the Form W-2.
  • Box 13 – If the minister or employee participates in the Free Will Baptist Retirement Plan, either through employer/church contributions and/or salary reduction contributions, check the box that reflects “retirement plan.”
  • Box 14 – Report housing allowance or fair rental value of parsonage for ministers. For example, if the minister received a housing allowance, Box 14 would report “12000.00 – Minister’s Housing Allowance.” If the minister lives in a parsonage, Box 14 would report “12000.00 – Parsonage Rental Value.”
  • Box 15 through Box 20 – nothing appears in these boxes generally for ministers. However, in the case of employees, the church will most likely be required to withhold state and local taxes if applicable. If so, then the treasurer would complete these boxes as appropriate.

The IRS provides detailed instructions on the completion of Form W-2 if such is needed beyond these cursory guidelines. In addition, the church treasurer should seek guidance and advice from a qualified tax professional if he or she is unsure on how to adequately complete the Form W-2 or the Form 1099. Seeking advice before providing the forms to the wage earner and before filing such with the IRS is much easier than the treasurer trying to correct incorrect forms already filed.

A W-2 form must be issued to any employee (including ministers) who received compensation from the local church during the previous tax year. In completing the forms, here are a few tips to remember:

  • The W-2 forms must be completed and issued to each employee by no later than January 31. The employ er/church must then make sure that they submit to the Social Security Administration “Copy A” of each W-2 form and the W-3 transmittal form by no later than the end of February.
  • You can obtain blank W-2 forms from your local IRS office, your local post office, or by calling the IRS toll-free forms number (1-800-TAX-FORM).
  • All dollar entries on the W-2 should be made without dollar signs and commas, but with a decimal point and cents. For example, $1,000 should read as “1000.00.” If you put down 1000, the IRS scanning equipment will read that as $10.00– so make sure that decimals and cents are used.
  • If a box on the W-2 does not apply, leave it blank. Do not insert “0” or “N/A.”
  • Make sure that you use the correct employer identification number (EIN) for the church/employer. This is critical especially if you have more than one entity (such as a church school) operating under a similar name.
  • In identifying employees on the W-2 (Box e), do not include titles, such as Rev., Mr. or Dr. Also, do not include suffixes such as Jr. or Sr.
  • Do not include the ministerial housing allowance or the fair rental value of the parsonage in Box 1 wages.
  • Check the retirement box in Box 13 only if the minister or church-related employee participates in a recognized retirement plan, such as the Board of Retirement.
  • Make sure the ink on the W-2 is not too faint, and that the writing is legible and not too small.
  • If you need additional assistance in completing the W-2 form, do not hesitate to contact the Board of Retirement for general information or for specific information, you may call the IRS directly at 1-866-455-7438 for assistance.
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