IRS Reporting, Payroll & More
IRS Reporting, Payroll & More
Dear Pastors, Finance Chairs and Treasurers,
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 some reporting requirements and annual reminders.
1) 2019 W-2 Preparation: All churches must prepare and distribute W-2 forms for their pastors and their lay staff by January 31.
Church plans are still exempt from reporting the value of the health care coverage on Form W-2.
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 Medical FSA’s do not need to be reported on the W-2. However, the amount in Box 1, will be less than it would be otherwise, since the employee is receiving less compensation as a result of salary deductions for healthcare and dependent care FSAs.
If your pastor is 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) and b) the employee contribution to their HSA. The conference/employer contribution is different for each of the three HDHP plans, so check online to see what the amount should be. Employer HSA contributions are not considered taxable income, but must be reported in Box 12, using the code W "Employer Contribution."
Clergy contributions to UMPIP should be reported in Box 12, Code D. UMPIP is an IRS Section 403(b) retirement savings plan for clergy and lay employees of the United Methodist Church and affiliated organizations.
Moving expenses are now considered compensation under US Tax law. Regardless of whether the church reimbursed the clergy or paid the mover directly, the associated costs are considered income. Therefore, be aware that moving costs are subject to self-employment taxes and churches need to remember to include the moving reimbursement as taxable income on the pastor’s W-2.
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) Section 125 Agreements: Many churches have valid Section 125 Cafeteria Agreements on file. This agreement allows the church to offer pre-tax deductions for the pastor’s portion of the HealthFlex rate, DCA, FSA and HSA, as well as the pastor’s UMPIP contribution. You should be renewing your Section 125 Agreement every year. The forms and information can be found on our website: http://www.nyac.com/section125plans
3) 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.
If you have questions about Housing Allowances, please read Ross Williams’ explanation: https://www.nyac.com/blogdetail/12934200
4) The US Department of Labor has issued its final ruling on exempt employee salary levels and overtime pay. If a full time, exempt employee is earning less than $35,568 annually, then starting on January 1, 2020, the employee must be paid overtime when working more than 40 hours per week. The full DOL ruling is here. If you believe this affects one or more of your employees, then 1) re-evaluate the employee's exempt status, 2) consider increasing their salary or 3) limit hours to preclude overtime work.
The staff of the New York Conference wish you and your church a wonderful and blessed Christmas! We look forward to serving you in 2020.