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1099 misc tax form

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					                                            FORM 1099-MISC
                                  Miscellaneous Income for Priests


Mass stipends or stole fees paid to a priest by a parish are to be reported annually to the diocese.
Stipends or stole fees that are paid directly to a priest by an individual/parishioner are not to be reported
by the parish to the diocese. The priest, however, is required to report such fees along with any fees paid
by a parish when filing his tax return.


REPORTING
Effective January 2005, 1099 information for priests is required to be reported to the diocese on-line by
the deadline (which is generally the end of the first week of the calendar year).        Proper planning is
therefore crucial.   For priests on diocesan payroll, you are now able to select their name from a drop-
down menu and certain fields will be populated (e.g. address, social security number). Then, all that is
required is to input the amount paid to the priest. However, if a priest is not on diocesan payroll, all the
information required to complete the form must be gathered by the location (correct name, address,
social security number and amount paid). It is the location’s responsibility to discern if a priest is on
diocesan payroll and consequently whether or not you need to gather this additional information.


As with all other 1099 payments, the Diocese of San Diego is required to report taxable payments made
to priests on an aggregate basis. We therefore ask each location to send in information about all
applicable payments made to priests during a calendar year even if the payments for your location are
less than $600. Once we receive all the forms, we combine the information and send 1099’s to the IRS
for those priests that were paid a total of $600 or more from all locations.


Please note that we are required by the IRS to report payments made to individuals. Consequently, if an
order priest receives payments directly from a parish, we are required to report it to the IRS. In order to
avoid a 1099 being issued, stipend payments should be sent to the priest’s order.


ALLOWANCES
Several allowances are processed through the diocesan payroll system to ensure compliance with
reporting requirements of the Internal Revenue Service. These allowances are reported with salary on a
priest’s W-2 and so should not be reported to the diocese for 1099 purposes. For priests who qualify, the
following benefits are paid annually with the January 31 payroll:




Diocese of San Diego – Office for Finance                                                 April 2005
    1.   $2,000 Social Security allowance to all diocesan and religious priests who made Social
         Security tax payments in the prior year. This allowance is considered taxable income and is
         included with salary in box 1 of Form W-2.

    2.   $1,000 retirement allowance for all diocesan priests who request it, either as a reimbursement
         for their contribution to an Individual Retirement Account (IRA) or as payment through payroll
         deductions to a Tax Sheltered Annuity (TSA).

         IRA: Reimbursement for a priest’s contribution to an IRA is considered taxable and is included
              with salary in box 1 of Form W-2. A priest generally gets a tax deduction on his 1040 for
              his contribution to an IRA.

         TSA: Payments through payroll deductions made to a priest’s TSA are excluded from income
              and therefore are not included in box 1 of Form W-2.


Although the above allowances are paid through diocesan payroll, other allowances paid to a priest by a
parish may be reportable to the diocese for Form 1099. If the parish has an accountable reimbursement
plan (i.e. substantiation for expenditures is provided to the parish by the priest), amounts paid to a priest
under the plan are tax-free to the priest and are therefore not reported on Form 1099. However, under
IRS rules, if a parish pays an allowance to a priest and requires no substantiation, the parish has a non-
accountable plan. Amounts paid to a priest under a non-accountable plan are taxable and must be
reported on Form 1099.


The housing portion (“room”) of room and board is an income tax-free benefit to a priest. Parishes
should not report the value of a priest’s housing whether the priest lives in a rectory or receives a cash
housing allowance. Priests, however, are required to add the value of his housing to his other earnings
when computing Social Security self-employment tax.


The sustenance portion (“board”) has specific requirements that must be met before the IRS considers it a
tax-free benefit. However, these requirements are somewhat subjective and are difficult to apply to
current clergy situations.     We believe that most priests are in substantial compliance with these
regulations.




Diocese of San Diego – Office for Finance                                                 April 2005

				
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