Understanding Clergy W-2 Form
By January 31st, an employer must give or mail an employee’s copies to each employee from whom the tax was withheld during the year or wages paid for services.
For employees whose employment ends before the end of the year, W-2 Forms can be supplied any time after employment ends, but no later the January 31st. If the employee requests his or her W-2 form, it must be furnished within 30 days of the request or within 30 days after the final wage payment, whichever is later.
Ministers and other church staff members should carefully review their W-2 Form to be sure that it does not report more income than was actually received. If an error was made, the church should issue a corrected tax form (Form W-2c).
W-2 Box 1 through 17
Box 1 – Wages, Tips, and Other Compensation
This box should contain all taxable compensation for the employee.
Box – 2 Federal Income Tax Withheld
This box should list all federal income taxes withheld from the employee’s wages. This amount should be the same as the amount of withheld income taxes for that employee reported on the
Church 941 forms. Clergy are exempt from federal withholding unless they have elected the optional withholding method.
Box 3 – Social Security Wages
Not applicable to clergy. Clergy are exempt from FICA. If you receive a W-2 from a secular source, this will report secular wages subject to FICA tax. This box is usually the same amount as Box 1, but not always. The total of Box 3 and 7 should not exceed $142,800 (2021 maximum social security wage base).
Box 4 – Social Security Tax Withheld
Not applicable to clergy. Clergy who report their income taxes as employees are still treated as self-employed for social security purposes. Report FICA (social security) taxes that you withheld from any secular employee.
Box 5 – Medicare Wages and Tips
Not applicable to clergy. The wages and tips subject to Medicare tax are the same as those subject to social security tax (box 3 and 7), except that the wage base for Medicare is unlimited.
Box 6 – Medicare Tax Withheld
Not applicable to clergy. Enter any secular Medicare tax withheld.
Box 7 – Social Security Tips
Not applicable to clergy.
Box 8 – Allocated Tips
Not applicable to clergy.
Box 9 – Advanced EIC (Earned Income Credit) Payment
Advance EIC payments are paid to an employee who files a Form W-5 with his or her employer and is eligible by (a) earning less than $28,280 for the year and (b) having a child living with him
or her.
Box 10 – Dependent Care Benefits
Show the total amount of dependent care benefits under Section 129 paid or incurred by you for the employee. The total should include all amounts paid or incurred even if in excess of the
$5,000 exclusion.
Box 11 – Nonqualified Plans
Show the amount of distribution to an employee from nonqualified plans, 457 plans, deferred compensation plans, or housing equity plans. Also,, report distributions in box 1. Report distributions from these plans to beneficiaries of deceased employees on Form 1099-R.
W-2 Box 12 – Employer’s Use
Complete and code this box for all items described below that apply.
Do not report in box 12 any items that are not listed as codes A-V.
Use the code along with the dollar amount. The code should be entered using capital letters. Leave one space blank after the code, and enter the dollar amount on the same line. Use decimal points, but do not use dollar signs or commas. (For example, 401k contributions of $4,300.00 would be reported as D 4300.00.)
The box was enlarged to allow for three entries instead of two as in the past.
A – Will generally not apply to church employees
B – Uncollected Medicare tax on tips
C – Group term life insurance in excess of $50,000 (should be included in box 1)
D – Elective deferrals to 401K plans
E – Elective deferrals to 403B tax-sheltered annuity
F – Will generally not apply to churches
G – Elective and non-elective deferrals to deferred compensation plans, 457 (b) plans, and
housing equity plans
H – Will generally not apply to churches
J – Nontaxable sick pay
K – Will generally not apply to churches
L – Substantiated employee business expense reimbursements
M – Will generally not apply to churches
N – Will generally not apply to churches
P – Excludable moving expense reimbursements paid directly to the employee
Q – Will generally not apply to churches
R – Employer contribution to a medical saving account (MSA)
S – Employee salary reduction contributions to a section 408(p) SIMPLE
T – Adoption benefits
V – Will generally not apply to churches
W – HSA paid by the church
Box 13
Statutory Employee: Churches rarely have statutory employees (e.g. certain drivers, insurance agents, and salespersons).
Retirement Plan: If an employee was an active participant in a retirement plan maintained by the church, check this box. Do not check this box if contributions are to a nonqualified deferred
compensation or housing equity plan.
Third-party sick-pay: Will generally not apply to churches.
Box 14 – Other
You may use box 14 for any other information that you want to give the employee. Label each item. Examples are amounts contributed to union dues, educational reimbursements, fair rental value, housing allowance, parsonage allowance, utility allowance, or utilities paid by the church.
Housing Sample: Housing $25,000
Parsonage Sample: FRV $9,600
Utilities $2,800
Parsonage Allowance $2,500
Box 15 – Employer’s State I.D. Number
This number is assigned by the individual states, although many states simply use the federal number for their state programs. This box is separated into two parts by a dotted line so
that you may report two-state I.D. numbers if you are reporting wages for two states. If you are reporting for one state, enter the number in the top portion of the box above the dotted line.
W-2 Box 16 Through 20
You may use these boxes to report state and local income tax information.
W-2 Box 17
List all state income taxes that you withheld from the employee’s wages.
Contact Clergy Financial Resources to help you with the next steps.
Clergy Financial Resources
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11214 86th Avenue N.
Maple Grove, MN 55369
Tel: 1 (888) 421.0101
Fax: 1 (888) 876.5101
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
For more information or if you need additional assistance, please use the contact information below.
Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (888) 421-0101
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com