Proper church reporting really matters, and we’re here to help make sure your church does it right. This snapshot from the 3 Church Reporting Refreshers Podcast features some of the most common mistakes made by churches in respect to compensation paid to employees. Catch these at year end before the W-2’s are filed to avoid complicated filing territory later on.
Top 4 Common Compensation Reporting Mistakes
- Failure to report taxable fringe benefits and social security reimbursements as taxable compensation on the form W-2. Retirement contributions, automobile allowances, and other fringe benefits must be properly reported as taxable compensation to avoid underreporting.
- Reporting social security and Medicare wages and withholding in boxes 3, 4, 5, and 6 of the form W-2 for pastors. Pastors are always subject to SECA-type social security (never FICA) which is calculated on the Schedule SE. If you have social security data in these boxes on the W-2, the incorrect type of social security has been filed.
- Failure to report non-cash compensation as taxable compensation on form W-2. This includes gift cards and other benefits given to a pastor. They are seen as taxable compensation in exchange for services rendered.
- Including a designated housing allowance as taxable compensation in box 1 of Form W-2. The housing allowance is typically fully taxable for social security purposes, but tax-free for income tax purposes.
Catch the full podcast for further discussion and companion resources to help you excel in church administration: