How do I enter a Housing Exclusion for Clergy? This is not an allowance but an exclusion on reportable income at end of the year on their w2.

You've come to the right place, @Shantel72.

I'm more than happy to walk you through the steps on how to record your clergy housing exclusion. You can choose between Clergy Housing (Cash) or Clergy Housing (in-Kind). The taxability of the two clergy housing pay types is identical, and both will show in box 14 of Form W-2. Let's go to your employee's profile to set up.

Difference between the two:

• Cash: A ministry gives funds to a clergy member through payroll to pay for their own housing. 
• In Kind: A ministry provides housing to a clergy member and only needs to report the amount on Form W-2 without increasing the net of the paycheck.

To set up:

1. Go to Workers, then hit Employees.
2. Choose an employee and Edit employee.
3. Select the Pencil icon next to Pay.
4. Under How much do you pay Employee?, tick Add additional pay types.
5. Click Even more ways to pay Employee.
6. Choose either Clergy Housing (Cash) or Clergy Housing (In-Kind).
7. Hit Done.

You can refer to this article to guide you along the way: Clergy and church payroll.

Additionally, here's a link that covers all tasks you can do when using the payroll feature.

Feel welcome to message me if you still have questions or concerns with payroll. I'm always here to assist you. Stay safe and have a great day ahead.

Thank you but that doesn't work. I currently have it set up as Housing Allowance in Kind as she doesn't' receive any additional funds.  But when I run the W2 it does not reduce the taxable income by that amount.

This is a Housing Exclusion, not an allowance.  So she receives a Salary that we then pull payroll taxes out of during the year.  However, at the end of the year, she is allowed to "exclude" a portion of her taxable income as Housing costs - this is reported in Box 14 but is noted as housing exclusion.  This is what I am trying to get set up. If you go to this link it will show you the difference between housing allowance and housing exclusion on a clergy W2.

https://www.westohioumc.org/sites/default/files/conference/documents/pdf/page/2020-clergy-example-w2...

Hi there, @Shantel72.

Please contact our Payroll Support so they can check your payroll data and assist you further. This way they can check for a correction on the W-2 form.

Let me guide you on how to reach them.

1. Go to (?) Help, then Contact us.
2. In What can we help you with? field, enter a brief description of your issue.
3. Click Let's talk.
4. Snap the Get a callback button.

Should you not see the option for Get a callback, you can toggle the option by entering Support in How can we help?.

I'm also attaching this article for your reference: Commonly used articles to get started with Payroll.

In addition, you can find articles that cover common questions in QuickBooks Online at the following link: Helpful Articles.

Fill me in if you have other questions and concerns. I'd be glad to help. Thank you for posting and have a good day.

I would like to update the community that if you are using the online payroll system for your church payroll, QB can not set up a housing exclusion, only the allowance. To do the exclusion through online payroll, submit the w2 through QB and then create a corrected copy and submit that through Social Security Administration.  I will warn you that it does create some additional paperwork in the end SSA always questions and wants confirmation of what you changed.  I will be looking for a different payroll service as I have 2 individuals that this pertains to and it isn't worth the work and confusion to continue doing what I am doing.  I believe that if you are using the desktop version you can make the changes before submitting it.  I do want to thank the Quickbooks team for helping me and the due diligence that the individual, Josh, did to try and get this solved.

I just wanted to confirm with everyone in the community that a Housing Exclusion is not possible through QuickBooks online payroll.

I know I'm late to the party, but more needs to be said.

I am a CPA and have been doing minister's taxes for 40 years now. 

"Housing allowance" and "housing exclusion" are being used in this post in a way that is "proprietary" (for lack of a better term) to this conference of churches, but not having the meaning that is generally understood based on the tax law.  The IRS language is that the minister may receive an "allowance" which is "excluded" from income.  The "allowance" is "excluded" -- it's the same thing. 

But this conference of churches, on the other hand (see the original poster's link), uses the terms as: the church pays the minister a housing "allowance" but also designates an additional amount of the minister's cash salary as housing "exclusion".

The IRS rule is that the amount excluded from income cannot exceed "the amount officially designated (in advance of payment) as a housing allowance" (this is one of several limitations).  Thus I hope that both the amounts mentioned (the housing "allowance" and the housing "exclusion" have been "officially designated (in advance of payment) as a housing allowance."

But I digress from the point.  It is called an "exclusion"; that portion must be excluded from the minister's compensation (cash salary paid to Pastor ... in your parlance) in your setup, and added to the housing "allowance" category.  Contrary to the conclusion drawn earlier, QuickBooks can handle this exclusion; just by excluding the "exclusion" from the cash compensation category and adding it to the housing "allowance" category.  For internal budgeting reasons you might have two categories, one called "allowance" and one called "exclusion".  But for payroll reporting, they are the same thing: an amount you have excluded from wages and paid as a housing allowance.  (And, like a good preacher, I've just reiterated the same thing three times, using slightly different words.)

Hi

So basically if we put it in additional pay types, Clergy Housing (cash), it will populate it into the correct box on the W2 (box 14)?

If the pastor takes only housing and no salary, is there a way to get QBO to do this? Do you know?  It is asking me to put a salary in.

Thanks

TB

I went around and around with QB on this one.  The final resolution was to mark them with a salary of .01 per hour with no hours listed.  then I could enter the housing allowance under Additional pay types: Clergy Housing  (Cash)

@annecsmith1953  how did this affect keeping track of the vacation, sick, and holiday pay for the minister taking all pay as Clergy Housing?

I used your workaround of the .01/hr with no hours and put all the salary in the clergy housing [cash] for each check. However we give this person vacation and sick which are supposed to accrue per check.  As well as paying for holidays.

Having the accrual be able to be debited when used is an issue if all monies are in clergy housing and not salary.

It seems I will have to manually deduct the time, which is aggravating.

Just wondering if there is a way around this.

There is a work-around, I believe, that will save you the weekly effort at fixing accrued benefit numbers.

Add a salary amount of 1 penny per week.  Surely no one will complain about that additional wage.

If accrued benefits won't run off of salary, but only hourly, then you can set up hourly wages of 40 hours at 1 penny per hour per week.

In either case, if the powers that be don't want to pay the extra penny, or 40 pennies per week in salaries or wages, then a PRE-TAX deduction can be set up for the same amount, (posted to the same general ledger account), and the two will net out to zero.  It will take a couple of minutes to set up the new category and then the recurring deduction, but it will save a bunch of weekly editing related to accrued benefits.

So the cents will show up as box 1 on the W2? The clergy housing will show on box 14 as other?

Will any of this make fed or state taxes be withheld?

Also how do you set up?

In either case, if the powers that be don't want to pay the extra penny, or 40 pennies per week in salaries or wages, then a PRE-TAX deduction can be set up for the same amount, (posted to the same general ledger account), and the two will net out to zero.  It will take a couple of minutes to set up the new category and then the recurring deduction, but it will save a bunch of weekly editing related to accrued benefits.