@CyndieT wrote:
Thanks for the help that did give me some options to make it right. Appreciate the help.
It sounds like you might be the treasurer rather than the pastor? This is what I did at my church.
Suppose the pastor's agreed salary was intended to be $500 per week net after SE tax. I would cut a check for $575, so after the pastor paid the 15% SE tax, his net pay was $500.
Now, we also contributed 12% of his salary ($60) to a denominational pension scheme. Since that was subject to SE tax, I bumped his paycheck another $9 (15% of $60). And, he lived in a parsonage valued at $12,000 per year, or $230 per month. Since that is also subject to SE tax, and we wanted him to "net" $500 per week, I bumped his check another $35. So his paycheck ended up being $619.
After 52 weeks of that, I issued a w-2 with $32,188 in box 1, with boxes 2-6 blank. I issued a letter on letterhead, signed as treasurer, informing him that he also had a $12,000 housing allowance and $3120 pf pension contributions subject to SE tax. After that, it was the pastor's responsibility to report that his cash wages were $32,188 but his income subject to SE tax was $47,308, and it was up to him to prepare his own tax return or see a pro. (I could have prepared his personal tax return as well, but I was concerned about a potential conflict of interest, so I didn't.)
There are other ways to arrange things, but that's how we did it. Hope that helps.
