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Set up clergy on payroll

by Intuit•12• Updated 1 month ago

Learn how to exempt clergy (or ministers) from payroll taxes. And learn how to set up a housing allowance item for clergy.

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 website.

We show you how to set up clergy and housing allowance in QuickBooks.

Exempt your clergy from payroll taxes

If you need to exempt your clergy from any payroll taxes, select your payroll product in the steps below to learn how.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Step 1: Exempt from federal and state income tax

Follow the steps to Exempt your employee from Federal or State Withholding.

Step 2: Exempt from all other payroll taxes

QuickBooks Online Payroll

For a better experience, open this article in QuickBooks Online. Launch side-by-side view

Select Payroll, then select Employees.
Select your clergy from your employee list, and then select Edit Employee.
From What are [Employee’s] Withholdings?, select Edit ✎.
From the Tax Exemptions section, select the Social Security, medicare, FUTA, or [State] SUI boxes as appropriate.
Select Save, and then select Done.

QuickBooks Desktop Payroll Assisted

Contact us for help exempting your clergy from payroll taxes.

QuickBooks Desktop Payroll Basic, Standard, Enhanced

Select Employees.
Double-click your clergy.
From the Payroll Info tab, select Taxes.
From the Federal tab, uncheck the FUTA, Social Security, or medicare boxes as appropriate.
From the State tab, uncheck the SUI box and any other state tax boxes as appropriate.
If your state has an SUI surcharge or tagalong: from the Other tab, select your state's SUI surcharge or tagalong item, then select Delete.
When finished, select OK twice.

Set up clergy housing allowance

QuickBooks Online Payroll

For a better experience, open this article in QuickBooks Online. Launch side-by-side view

There are two clergy housing items to choose from:

Use the Clergy Housing (Cash) pay type if you provide funds to your minister to pay for their housing and related expenses. This will increase your minister’s net pay.
Use the Clergy Housing (In-Kind) pay type if you pay for the housing and related expenses on your minister’s behalf. This won’t increase your minister’s net pay.

Select Payroll, and then select Employees.
Select the employee's name, and then select Edit employee.
From How much do you pay [Employee]? select Edit ✎.
Select Additional pay types, and then select either the Clergy Housing (In-Kind) or Clergy Housing (Cash) checkbox.
Enter an amount if it's the same each pay period. You can also leave it blank, then enter the amount as you create a paycheck.
Select Save, and then select Done.

QuickBooks Desktop Payroll

Refer to the table below when you set up clergy housing. If you’re not sure how the housing should be taxed, you might want to check with an accountant or tax pro.

Go to Lists, and select Payroll Item List.
Select Payroll Item and select New.
Select Custom Setup and select Next.
Under Payroll Item Type, select Addition and select Next.
Enter a name for the item (for example, Clergy Housing) and select Next.
Select the Expense account. Select Next.
To select the Tax Tracking Type, use the table below. Select Next.
The Taxes default window is based on the Tax Tracking Type you selected. You may make changes to the default tax settings when noted in the table. Select Next.
For Calculate Based on Quantity, select Neither and select Next.
For Gross vs. Net, select Gross and select Next.
Leave Default Rate and Limit fields blank. You can add the rate and limit when the item is added to the employee profile.
Select Finish.

Note: Any payroll item with a tax tracking type of None doesn’t show on any tax forms, including your employee W-2 forms.

Goal	Tax Tracking Type	W-2 Outcome
Set up non-taxable item	Create an addition with Tax Tracking Type of Other *In gross vs. net, select net to exclude this addition from Adjusted Gross.	Shouldn't increase any wages on W-2. Should appear in Box 14 on W-2.
Set up a fully taxable item	Create an addition with Tax Tracking Type of Compensation	Will increase Box 1, 3, and 5 on W-2, but won’t show in Box 14. (If Box 14 is required choose Fringe Benefits as the tax tracking type.
Set up an item taxable only by federal and state income tax (FIT & SIT)	Create an addition with Tax Tracking Type of Fringe Benefits and select only FIT and SIT items on the tax settings.	Will increase Box 1 and 16 and report in Box 14 on the W-2. Won't increase Box 3 and 5
Set up an item taxable only by Social Security and Medicare	Create an addition with Tax Tracking Type of Other and select only Social Security and Medicare on the tax settings.	Will increase Box 3 and 5 and will report in Box 14 on the W-2. Won't increase Box 1 and 16

QuickBooks Desktop Payroll AssistedQuickBooks Desktop Payroll BasicQuickBooks Desktop Payroll EnhancedQuickBooks Desktop Payroll StandardQuickBooks Online Payroll CoreQuickBooks Online Payroll EliteQuickBooks Online Payroll Premium

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