[Nevergiveup2012]

This question is not related to CPA exam at all.

I recently started working for a tax firm, which is a new area to me since my past experiences were mostly in Audit and private industry.

I am in the process of preparing a tax return for a client who works for a company . He receives W-2 from his employer but they didn’t withhold any federal, Social Security, and medicare taxes from his paychecks. Is my client considered a “self-employed” then?. Should his income be reported in Schedule C ? and he would be subject to self-employment taxes. or should his income be reported under “wages” in 1040?

Your advise is appreciated. Thank you

BEC - 86 (8/31/12)
AUD - 97 (11/18/12)
REG - 83 (5/12/13)
FAR - 91 (12/2/13)
Done!!!

[Nevergiveup2012]

Thanks for the responses. I knew that I would find a group of knowledgeable individuals in this forum.

My client didn't opt out of social security withholding nor did he fill out form 4361. The church chose not to withhold his taxes. Would he be responsible for the employer portion of self employment taxes too? and would the employer portion be deductible to my client as a business expense? @AHarrelson mentioned of using form 2106 for that.

Thankfully, he didn't receive any housing allowance.

BEC - 86 (8/31/12)
AUD - 97 (11/18/12)
REG - 83 (5/12/13)
FAR - 91 (12/2/13)
Done!!!

[Nevergiveup2012]

Thanks for the responses. I knew that I would find a group of knowledgeable individuals in this forum.

My client didn't opt out of social security withholding nor did he fill out form 4361. The church chose not to withhold his taxes. Would he be responsible for the employer portion of self employment taxes too? and would the employer portion be deductible to my client as a business expense? @AHarrelson mentioned of using form 2106 for that.

Thankfully, he didn't receive any housing allowance.

BEC - 86 (8/31/12)
AUD - 97 (11/18/12)
REG - 83 (5/12/13)
FAR - 91 (12/2/13)
Done!!!

[TAXMAN710]

Schedule SE takes care of both employee and employer portion of the tax…and you will get an adjustment on the front page of the 1040 for SE tax deduction that is the employer portion of the tax.

REG-July 12
BEC-May 12
FAR-July 12
AUD-October 12

[TAXMAN710]

Schedule SE takes care of both employee and employer portion of the tax…and you will get an adjustment on the front page of the 1040 for SE tax deduction that is the employer portion of the tax.

REG-July 12
BEC-May 12
FAR-July 12
AUD-October 12

[Nevergiveup2012]

@taxman710 – you are correct that pastors' wages can be reported in either W2 or 1099 depending on the church.

Through my research, I learned that pastors can be classified as both a church employee or self-employed.

When reporting income tax pastors are seen as employees of their church and the church can decide whether or not to withhold tax from the pastor’s pay. When it comes to Social Security and Medicare, pastors are classified as self-employed and under federal tax law, churches cannot withhold FICA and Medicare taxes, and no taxes are reported on the pastor’s W-2 form at the end of the tax year.

One more thing – their housing allowance would not be subject to Fed income tax but subject to Self-Employment tax.

I can see why pastors tax is rather confusing 🙂

BEC - 86 (8/31/12)
AUD - 97 (11/18/12)
REG - 83 (5/12/13)
FAR - 91 (12/2/13)
Done!!!

[Nevergiveup2012]

@taxman710 – you are correct that pastors' wages can be reported in either W2 or 1099 depending on the church.

Through my research, I learned that pastors can be classified as both a church employee or self-employed.

When reporting income tax pastors are seen as employees of their church and the church can decide whether or not to withhold tax from the pastor’s pay. When it comes to Social Security and Medicare, pastors are classified as self-employed and under federal tax law, churches cannot withhold FICA and Medicare taxes, and no taxes are reported on the pastor’s W-2 form at the end of the tax year.

One more thing – their housing allowance would not be subject to Fed income tax but subject to Self-Employment tax.

I can see why pastors tax is rather confusing 🙂

BEC - 86 (8/31/12)
AUD - 97 (11/18/12)
REG - 83 (5/12/13)
FAR - 91 (12/2/13)
Done!!!

[Author]

Replies