What Is A Social Security Allowance?

What Is A Social Security Allowance?

If you are a member of the Clergy, you may have seen the phrase “Social Security Allowance” on your W-2 or it might be a part of your compensation package. But what does that mean exactly?

To understand, we have to explain a difference between Clergy and Non-Clergy employees.

Non-clergy employees have Social Security and Medicare taxes taken out of their pay. Their employers also pay a matching portion of tax to the IRS. At the end of the year, the total of tax paid includes both an employee portion and an employer portion.

Clergy, however, do not have Social Security or Medicare taxes taken out of their pay. The Church does not pay any matching portion to the IRS, so the Minister has to pay both halves, the employee and employer portions. These are usually paid in quarterly estimates, using coupons or vouchers.

So how does this relate to a Social Security allowance?

In some cases, Churches may decide to pay half of the Social Security and Medicare taxes for the Minister, even though they don’t have to.  This payment of taxes on your behalf is called a “Social Security Allowance”.

Keep in mind even though the Church is paying taxes on your behalf, that Social Security allowance IS considered taxable income and needs to be reported on your return.

Original content by clergyfinancial.com. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.