@stherio1 wrote:
A 1099-NEC is not allowed because of a parsonage.
If the pastor answers to their denomination (district office, bishop, diocese) or to the church (such as a board of elders or a staff-parish committee that approves vacation time, can set the time and place of worship services, can approve their hiring or affirm their "call" to ministry at that church, etc.) then the pastor is a common law employee, and must receive a W-2. The church must also report the wages to the IRS using form 941 or 944, and the church may have responsibilities under state law such as paying workers comp insurance or unemployment insurance, family medical leave, and so on.
The church does not withhold social security and medicare tax, (boxes 3-6) and state and federal income tax withholding is optional, but the W-2 must be issued.
Very few pastors actually run truly independent churches to be paid on a 1099-NEC.
I'm not aware that the W-2 is specifically linked to a parsonage. However, a housing allowance must be designated in adavance and in writing by the board or committee that approves the pastor's compensation package. The existence of such a committee implies that the pastor is a common law employee, and if there is no such committee and the pastor is truly independent, then I don't think they can qualify for a tax-free housing allowance.
