FICA deducted before spouse was ordained

[kjk73]

My spouse was not ordained at the beginning of the year when she was hired as an assistant minister. FICA and Medicare taxes were withheld. In May she was ordained so no FICA and Medicare was withheld for the remainder of the year. Her W-2 shows the tax withheld but when Turbotax calculates SECA it calculates it for the whole year and I don't see any place that it credits for the FICA and Medicare withheld. How do I get that entered?

[AmyC]

FICA paid while working is normal and would be paid. You may be able to break up the w2 into 2 w2 forms. One showing the income before being ordained with the FICA and the second w2 showing the income after being ordained.

If FICA was withheld after being ordained, you should get a refund by submitting a written request to the employer. If the employer will not refund the money, you should submit form 843 to the IRS. 

See Social Security Tax/Medicare Tax and Self-Employment for complete instructions on filing the self-employment tax. Also, you can ask to be exempt on Form 4361 but you have to really be sure you can compensate for losing Social Security benefits.

@kjk73 

[Opus 17 · Accepted solution]

In this situation, you need to enter 2 different W-2s. Manually split the W-2 into employee wages (with box 3-6 wages and taxes) and a clergy W-2 with boxes 3-6 blank.  Only check the "religious wages" box for the religious W-2. 

However, I think turbotax will object if you have two W-2s from one employer.  You may be able to ignore the error tor it may block you from e-filing.  I will have to think whether there is another workaround.  Likely you would have to be using Turbotax installed on your own computer from a CD so you can make some manual entries and maybe even an override.  I will get back to you. 

[Opus 17]

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@AmyC wrote:

If FICA was withheld after being ordained, you should get a refund by submitting a written request to the employer. If the employer will not refund the money, you should submit form 843 to the IRS. 

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If the church withheld FICA after the pastor was ordained, that can be addressed in turbotax by choosing the option "Pay SE tax on housing allowance only" in the W-2 interview for religious wages.  I have previously argued that there is no correct situation where this box is needed, because the pastor should get a refund of their SS tax from the church (by having the church amend their 941s).  (Remember that if the church withholds FICA, and the pastor also pays SE tax on their wages, and the pastor asks for a refund with form 843, the church is still out the 7.65% FICA and medicare match that they should not have paid.  The correct result is for the church to amend their form 941s, refund the taxes to the pastor, and issue a corrected W-2.  But as long as the option "Pay SE tax on housing allowance only" is in the program, people might as well use it.)

However, that is not the situation here.  I recommend that @kjk73 enter their wages as if they received 2 W-2s, one as a regular employee and one as a pastor.  If Turbotax calls that an error, then I can investigate another workaround involving some manual data entries on one of the worksheets. 

[kjk73]

This appears to have worked and did not produce an error. I'll have to check it some more since it's not quite as clearcut and merely subtracting the FICA and Medicare tax from what it calculated for the SE tax because of the 92.35% multiplication. I think it's OK, though.

Thanks.

[kjk73]

Thanks. The 2 W-2 answer appears to have worked.

[Opus 17]

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@kjk73 wrote:

This appears to have worked and did not produce an error. I'll have to check it some more since it's not quite as clearcut and merely subtracting the FICA and Medicare tax from what it calculated for the SE tax because of the 92.35% multiplication. I think it's OK, though.

Thanks.

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You're not subtracting FICA from SE tax.  Very roughly speaking, suppose you earned $1,000 per month and you were ordained July 1.  Your box 1 taxable wage would be $12,000, but your box 3 FICA wages and box 5 Medicare wages would be $6000 and your box 4 and 6 taxes would be $372 and $87, respectively.  You would create an imaginary W-2 for the first half of the year that reports $6000 in box 1, box 3 and box 5.  Report all the box 4 and 6 taxes on this W-2, and you can divide the box 1 federal income tax in any manner, it doesn't matter.  Then you create a second imaginary W-2 for the pastor job that has $6000 in box 1, whatever you decide for box 2, and boxes 3-6 are blank.  When you enter this pastor W-2, you check the box for religious wages and answer "pay SE tax on wages and housing allowance."  Turbotax will put the $6000 of wages on schedule SE.

If you have trouble dividing your W-2, you can post the box 1-box 6 numbers here and I can help you split it.  (Don't post personal info like name, address, SSN or anything else.)