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Clergy Self Employment Tax

T-Town-CPA
Level 3

I have a client that is a member of the clergy.  In prior years he was responsible for all of his Self Employment tax on his W2 and Housing Allowance.  This year, the church paid 1/2 of his social security and included that on his W-2.  Within Pro-Series on the W-2 worksheet, when I select box F3 (Pay Self-Employment tax on W-2 Income and Housing Allowance) I get an error that says this should not be checked if Social Security or Medicare has been withheld on the taxpayer's W-2.

How do I get the program to calculate what SS should have been reduced by what was paid on his W-2?

Thank you in advance.

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7 Replies 7
jeffmcpa2010
Level 8

Where did the church report the SS that they paid on the W-2 Form?

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T-Town-CPA
Level 3

Thank you for your response.  They reported it as SS Tax withheld in boxes 4 and 6.

They did this as an agreement with the tax payer that they would cover 1/2 of his SS tax.  To accomplish this they grossed up his earnings for the tax and then withheld the SS tax for a $0 pay transaction.

 

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jeffmcpa2010
Level 8

So according to the W-2 the Church Withheld SS and Medicare from the Employee.

So following the W-2 he would no longer have to pay any Self Employment Tax.

It is possible that they grossed up the Wages for 1/2 of the total SS and Medicare, and actually did withhold the second 1/2 from his wages, and reported on forms 941, just like any other employer and employee.

I would be interested to see how the Church actually reported it on their 941 forms (if they did it at all).

I could make an argument in my mind to treat it like a regular W-2 and do nothing with the self employment tax, but probably some more questions for the Pastor, to get answers from the church on what they actually did as far as 941 treatment would be in order.

I have seen a lot of different things on pastor W-2 forms, but never this one.

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qbteachmt
Level 15

"To accomplish this they grossed up his earnings for the tax and then withheld the SS tax for a $0 pay transaction."

Whew.

Did you "do the math" to determine if they made Half a mistake, or a Full Change?

I love it when the intent is there, but the execution is done without proper guidance. God Bless them for trying.

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T-Town-CPA
Level 3

Thanks for your response.  Ageed as being generous, but the execution is problematic on my side.

Any thoughts on a work around to get credit for the payment made?

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jeffmcpa2010
Level 8

Based on what you said the W-2 shows, (If the 941s are the same) ALL of the SS has been paid.

1/2 by the church and 1/2 withheld from the pastor. I am not sure you need a credit for 1/2, or that you just don' need to report any for SE tax as it has been paid. 

Again, Not sure any of us really know what the church did, and that you would need to know before proceeding.

qbteachmt
Level 15

"Any thoughts on a work around to get credit for the payment made?"

Is it 7.65% or 15.3% or 6.2% or 12.4%?

We can't do that math for you.

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