IRS reporting Requirements
IRS reporting Requirements
Dear Treasurers and Finance Chairs (cc to Pastors),
The end of the year brings the joyous celebrations of the Christmas season and the hope for a peaceful New Year. Unfortunately it also brings some financial housekeeping issues with which we must all comply. Listed below are the reporting requirements and some annual reminders.
1) 2017 W-2 Preparation: All churches must prepare and distribute W-2 forms for their pastors and their lay staff by January 31. Please see the attached Example of Form W-2 for Clergy.
Church plans are still exempt from reporting the value of the health care coverage that would normally be reported in Box 12 of the Form W-2, with Code DD to identify the amount. Therefore, pastors that participate in HealthFlex do not need to have the cost of their insurance coverage listed on the W-2 at this time.
Pastors who elected a Dependent Care Account (DCA) must have this information reported on their W-2 in Box 10.
Medical Reimbursement Accounts or the commonly called health FSAs do not need to be reported on the W-2.
If your pastor enrolled in the HDHP (High Deductible Health Plan), you as their employer are required to report: a) the conference contribution to their Health Savings Account (HSA) of $750 for single members and $1,500 for families, and b) the employee contribution to their HSA. The total amount is to be reported in Box 12, using the code W.
If your church has less than 50 full-time equivalent employees and your pastor is enrolled in HealthFlex, Wespath (formerly the General Board of Pension and Health Benefits) will take care of many of your Affordable Care Act (ACA) reporting requirements.
Clergy contributions to UMPIP should be reported in Box 12, Code E, with a check mark in Box 13 Retirement Plan. UMPIP is an IRS Section 403(b) retirement savings plan for clergy and lay employees of the United Methodist Church and affiliated organizations.
Of course, the IRS is the best source of information about tax reporting, so please visit www.irs.gov for detailed information and instructions on completing your employee's W-2 forms.
2) IRS 1099-MISC should be used to report payments made in the course of trade or business to a person who is not an employee of the church. You should report payments for each person who has been paid $600 or more. You need to send Form 1099 to both the individual/business, as well as to the IRS by January 31, 2018. This is a change to the previously required date.
3) Section 125 Agreements: Many churches have valid Section 125 Cafeteria Agreements on file.This agreement allows the church to offer the pre-tax deduction for the pastor’s portion of the HealthFlex uniform rate, DCA, FSA and HSA deductions, as well as the pastor’s UMPIP contribution. You should be renewing your Section 125 Agreement every year, prior to January 1. The forms and information can be found on our website: http://www.nyac.com/section125plans
4) Housing Resolution: Now is also a critical time to make sure that your pastor’s Housing Resolution is properly documented. The conference has prepared a Housing Resolution template that you can use to record the housing agreement. The sample resolution is attached to this email. Per IRS requirements, all resolutions must be in place prior to the income excluded being earned. In other words, the resolution must be prepared and documented prior to January 1, 2018 for the calendar year of 2018.
If you have questions about Clergy Housing Allowances and Exclusions, please read Ross Williams' article: https://www.nyac.com/blogdetail/9607446
5) New York churches may also be deducting the premium costs from employee pay on a after-tax basis (for lay employees only) in accordance with the NY State Paid Family Leave Act. Employers should report employee contributions on IRS Form W-2 using Box 14 – State disability taxes withheld.
The staff of the New York Conference wish you and your church a wonderful Christmas! We look forward to serving you in 2018.
Files: example_of_form_w-2_for_clergy.pdf irsw-2reportingresponsibilitesforfsadcahsaaccounts.pdf nyac-clergy-housing-allowance-resolution.docx