Clergy housing (cash) vs Clergy housing (in kind)

I'll help you set up your pastor's payroll, michael.

Regarding the housing allowance, you'll need to use the Clergy Housing (Cash) for this since you provide funds to them. Then, use the Clergy Housing (In-Kind) for the designated housing exclusion. 

Here's how to set up the clergy housing items:

1. Go to Payroll and choose Employees.
2. Click the pastor's name, then hit Edit beside the Pay types section.
3. Select the Additional pay types dropdown, then tick the Clergy Housing (In-Kind) or Clergy Housing (Cash) checkbox.
4. Enter the amount for both and Hit Save.

You can also check out this article for further information: Set up clergy on payroll.

Additionally, I'll add this link to help you create, manage, assign, and update pay schedules for QuickBooks Online (QBO) Payroll: Set up and manage payroll schedules.

I'm here to back you up if you need further assistance setting up clergy. Just comment below. Have a great day!

Thank you for your response.  Just a follow up question.  So just looking at the housing exclusion portion which we will be including under the Clergy housing (in-kind) as you suggested.  So, say for example, we have set a pastor salary at $52,000 a year and our church has stated 50% of that salary can be used as a housing exclusion and we pay every 2 weeks (so 26 pays per year). 

  So when I am inputting his information into Quickbooks Online in the Pay type section, which of these options would I do to have the correct info on the W2 at the end of the year?     

(1) Enter Salary as $52,000 and then in the Clergy housing (in kind) recurring payment section we would put $1000 because we want $1000 of his Salary to be allocated for the housing exclusion each pay 

OR

(2) Enter Salary as $26,000 and then in the Clergy housing (in kind) recurring payment section we would put $1000 because we want $1000 of his Salary to be allocated for the housing exclusion each pay

Which option would result in half of his salary ($26,000) showing up as taxable income in box 1 of the W2 and the other $26,000 showing up in Box 14 of the W2 for the exclusion at year end?  We weren't sure if it pulls the exclusion automatically from the original salary of $52,000 or if we have to basically exclude it manually?

In addition, we are still unsure if we are going to include the housing allowance money that he gets extra in payroll or just give him a separate check.  But if we opt to include it, say in addition to his $52,000 salary we are giving him a housing allowance of (extra money) totaling $200 per pay. 

Would we just put the $52,000 in the Salary section and then the $200 in the Clergy housing (cash)?

I wasn't sure if both the Clergy housing (cash) and Clergy housing (in hand) in QB online are both set up to not be taxed for federal income tax.  

We just want to make sure that in this example that only $26,000 shows up in W2 box 1 and the other $26,000 (for the housing exclusion) and the $5,200 ($200 x 26 pays - for the housing allowance) both show up in Box 14.  

Thanks in advance.  

Did you ever find out the answer to this question? Whether it be option 1 or option 2? 

I am wondering the same thing??

Hi there, LisaM13.

Thanks for joining this thread. I want to help point you in the right direction for choosing the account for a percentage of the salary in QuickBooks Online.

In this particular situation I recommend speaking with your accountant to be sure of the specific account to select. They'll be able to give you the best advice based on your unique business setup and workflows. 

If you don't currently have an accountant, you can find one in your area that's trained in QuickBooks by searching here: Find a ProAdvisor

Please feel free to reach back out if you need any additional assistance with the entry after speaking with them. I'll be here to lend a hand.

I just spent close to 2 hours on the phone with Quickbooks support to find out that the clergy housing allowance cannot be a non-taxable wage that will report in box 14. The in-kind housing does not do what we need. The wages to our pastors need to be funds given to them just designated as a housing  allowance for box 14 that they themselves pay self-employment tax on and as the employer we do not deduct those taxes. I cannot believe we are the ONLY employer of pastors using Quickbooks who needs this sort of pay type. Help me out, please!

Hi there, @KDANA.

I understand how challenging on your end to know that the clergy housing allowance cannot be a non-taxable wage. Let me add info and guide you to exempt clergy from payroll taxes.

Clergy or ministers can be treated as employees or self-employed. Your church may also provide some or all of your minister's housing and utilities as part of their overall compensation package. Check out more info about clergy wages and housing on the IRS.

Here's how to exempt your clergy from payroll taxes:

1. Select Payroll, then select Employees.
2. Select your clergy 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.

For more info, check out this article: Set up clergy on payroll.

On top of that, I recommend reaching out to your accountant for an accurate setup of this payroll account.

To create, manage, assign, or update pay schedules, read this article: Set up and manage payroll schedules.

If you have additional questions, never hesitate to reply to this post. I'll be willing to lend a hand. Keep safe.

Thank you for your response, Brian, but that is not my issue. There are 2 of the 4 pastors on our staff that claim exempt status on taxes and file SE taxes. The other two want them processed thru Quickbooks, but on their salary wages only, not their housing allowance. That is the issue. WHAT pay type in Quickbooks allows those wages to be reported in box 14 AND not be taxed on it?

Hello there, @KDANA. Let me share some information regarding your query. 

QuickBooks Online supports only two taxability options for Clergy housing. Firstly, the Clergy Housing (Cash) option is applied if you provide funds to your minister to pay for their housing and related expenses, but it will affect the net pay. Secondly, the Clergy Housing (In-Kind) option is used if you pay for the housing and related expenses on your minister's behalf and usually, it wouldn't affect the net pay. Both options are generally exempt from income tax but are subject to self-employment tax. More importantly, they're normally reported in W-2, with the amount in box 14 with "CLERGY HSG."

Also, allow me to share the taxability-exempt list for Clergy Housing.

• FIT: Exempt
• SS: Exempt
• Med: Exempt
• FUTA: Exempt

You can visit this article for more information: Set up clergy on payroll.

For more guidance, I recommend consulting your accountant about the appropriate pay type that should be used and the best course of action when tracking your wages.

You can check this article to learn how to enter your employee's paycheck information: Add pay history to QuickBooks Online Payroll.

Please don't hesitate to contact us if you have further questions regarding pay types in QBO. We're always here to assist you.

My pastor also needs their Housing Allowance to show up in Box 14 ($5000). Their accountant states that Box 1 needs to reflect a decrease in their net earnings by the $5000. I have spent hours on the phone and chat with Quickbooks support and corrections team and have not found a resolution. Can someone advise on how to get Box 1 and Box 14 to show correctly?

Thank you for following up on this thread, pfrimmersadmin.

I acknowledge the importance of including the housing allowance in Box 1 of the W-2 form for your company. I'm here to lend a hand and offer alternative solutions to address your payroll concerns. 

In QuickBooks Online (QBO) payroll, housing allowance amounts are shown on the pay stub and in Box 14 of the W-2 form. Also, these amounts are not subject to payroll taxes.

There are several pay types available in the program to track the payroll item. However, it'd be best to consult your accountant to determine the appropriate pay type for recording the housing allowance (shown in Box 1 of the W-2 form).

Furthermore, you have the option to manually file the tax form and then send it to the IRS. Make sure to run the Payroll Summary report to check the payroll totals, which include employee taxes and contributions.

Here's how:

1. In your company head to the Reports menu on the left panel and choose the Standard tab.
2. Scroll down to the Payroll section and select Payroll Summary or type the report name in the Search field.
3. On the report's page, set a date range and click the Apply button for the changes to take effect.
4. If you want to include or hide a specific detail in this report, select Customize and Run report.

Refer to this article for more in-depth information: Create a payroll summary report in QuickBooks. You'll also learn how to calculate payroll wages, taxes, deductions, and contributions for employees

In addition, you can use these resources for your future tasks. They include information about managing pay types, printing your W-2s, as well as methods to view them online. Make sure to browse through each link to get the complete details:

• Add or change pay types
• Print your W-2 and W-3 forms
• View your pay stubs, time off, and year-to-date pay in QuickBooks Workforce
  
  

Let me know in the comment section below if you have additional questions about tracking the housing clergy item and processing your W-2 form. I'd be glad to lend a helping hand. Have a great day ahead, pfrimmersadmin.

I am not convinced that QBO has the ability to do what you want.  I have been on the phone for countless hours trying to get the W2 corrected for our pastor from 2023 because they DID NOT deduct the housing allowance from Box 1 (although it is correctly listed in box 14).  This guy is trying his best, but English is not his first language, and he is struggling to understand what needs to be corrected.

I have now completely given up on using the housing allowance for 2024 because the cash and in-kind are not doing what they should.