How can I enter wages to W-2 Income bix for a minister who is exempt from withholding?

Hello there, wrfcgtreasurer.

When setting up a minister’s W-2 in QuickBooks Online, you must treat them as a dual-status filer. It means they are considered an employee for income tax purposes but self-employed for Social Security purposes. 

To handle this correctly, you can manually set the minister's profile to be tax-exempt for Social Security, Medicare, and Federal withholding, as they are considered self-employed. It ensures that their gross salary is reported in Box 1 (taxable income), while Boxes 3, 4, 5, and 6 remain blank. Because the minister is exempt from FICA withholding, the church does not pay or withhold these taxes. Instead, the minister is responsible for paying them as self-employment tax (SECA) on their personal tax return.

Take a look at the screenshot below.

If the minister receives a housing allowance, it should be excluded from Box 1 but reported in Box 14. It provides the minister with the correct figures to calculate their total self-employment tax on Schedule SE. By following this process, the W-2 accurately reflects that the minister is a church employee who handles their own Social Security obligations.

You can reply here if you need further assistance. We’re here to help.

We have always included the salery less housing in box 3 and 5 because the wages ARE taxable for these items.  Is that not correct?

Hi there, @wrfcgtreasurer-g. Thanks for coming back to us.

Clergy or ministers can be treated as employees or self-employed. Moreover, for a self-employed minister, payroll and W‑2 reporting have some unique rules, and it's best to refer to a tax professional or an accountant if you’re not sure how the minister or their allowance should be taxed. If you don't have an accountant, you can find one here in our Resource Center.

In the meantime, here are a couple of quick links you can refer to as a guide to set up your minister's employee profile in QuickBooks Online (QBO) Payroll:

• W-2 Form Explained
• Clergy wages and housing on the IRS website

If you've confirmed they're exempt from payroll taxes like Social Security, Medicare, FUTA, or [State] SUI boxes, here's how you can do it:

1. Click on All apps and then choose Payroll, and select Employees.
2. Select your minister from your employee list, and then select Edit Employee.
3. From What are [Employee’s] Withholdings?, select Edit ✎.
4. From the Tax Exemptions section, select the Social Security, Medicare, FUTA, or [State] SUI boxes as appropriate.
5. Select Save, and then select Done.

Housing allowances are also handled differently. Check this article for more details: Set up clergy on payroll.

We'll be here in the Community if you still need help.