This time of year is always confusing for church treasurers and clergy. Which do you prepare for your pastor, a Form W-2 or Form 1099-MISC to report his/her wages? The IRS considers ministers as employees for income tax purposes and self-employed for Social Security and Medicare purposes. Which means the pastor should receive a Form W-2.
When completing the Form W-2, wages minus housing allowance are reported in Box 1. If the pastor volunteered to have federal income tax withheld, that amount is shown in Box 2. Otherwise Boxes 2-6 are left blank. The housing allowance can be shown in Box 14.
Remember ministers pay SECA tax not FICA tax. That is why Boxes 3-6 are left blank on a clergy Form W-2.
If the pastor only receives housing allowance, they should still receive a Form W-2 with the housing allowance being posted in Box 14.