Page 54 - 2020 Publication 17

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
contribution (discussed later), isn’t included in for that year, unless you have an excess defer- If you’re a member of a religious organiza-
wages subject to income tax at the time contrib- ral of a designated Roth contribution. See Pub. tion and you give your outside earnings to the
uted. Rather, it’s subject to income tax when 525 for a discussion of the tax treatment of ex- religious organization, you must still include the
distributed from the plan. However, it’s included cess deferrals. earnings in your income. However, you may be
in wages subject to social security and Medi- entitled to a charitable contribution deduction
care taxes at the time contributed. Catch-up contributions. You may be al- for the amount paid to the organization. See
Elective deferrals include elective contribu- lowed catch-up contributions (additional elec- Pub. 526.
tions to the following retirement plans. tive deferral) if you’re age 50 or older by the end Pension. A pension or retirement pay for a
of the tax year.
1. Cash or deferred arrangements (section member of the clergy is usually treated as any
401(k) plans). Stock Options other pension or annuity. It must be reported on
2. The Thrift Savings Plan for federal em- lines 5a and 5b of Form 1040 or 1040-SR.
ployees. If you receive a nonstatutory option to buy or Housing. Special rules for housing apply to
3. Salary reduction simplified employee pen- sell stock or other property as payment for your members of the clergy. Under these rules, you
don’t include in your income the rental value of
services, you will usually have income when
sion plans (SARSEP). you receive the option, when you exercise the a home (including utilities) or a designated
4. Savings incentive match plans for employ- option (use it to buy or sell the stock or other housing allowance provided to you as part of
ees (SIMPLE plans). property), or when you sell or otherwise dispose your pay. However, the exclusion can’t be more
5. Tax-sheltered annuity plans (section of the option. However, if your option is a statu- than the reasonable pay for your services. If you
pay for the utilities, you can exclude any allow-
403(b) plans). tory stock option, you won’t have any income ance designated for utility cost, up to your ac-
until you sell or exchange your stock. Your em-
6. Section 501(c)(18)(D) plans. ployer can tell you which kind of option you tual cost. The home or allowance must be provi-
7. Section 457 plans. hold. For more information, see Pub. 525. ded as compensation for your services as an
ordained, licensed, or commissioned minister.
Qualified automatic contribution arrange- Restricted Property However, you must include the rental value of
ments. Under a qualified automatic contribu- the home or the housing allowance as earnings
tion arrangement, your employer can treat you In most cases, if you receive property for your from self-employment on Schedule SE (Form
as having elected to have a part of your com- services, you must include its fair market value 1040) if you’re subject to the self-employment
pensation contributed to a section 401(k) plan. in your income in the year you receive the prop- tax. For more information, see Pub. 517, Social
You are to receive written notice of your rights erty. However, if you receive stock or other Security and Other Information for Members of
and obligations under the qualified automatic property that has certain restrictions that affect the Clergy and Religious Workers.
contribution arrangement. The notice must ex- its value, you don’t include the value of the
plain: property in your income until it has substantially Members of Religious
• Your rights to elect not to have elective vested. (Although you can elect to include the Orders
contributions made, or to have contribu- value of the property in your income in the year
tions made at a different percentage; and it’s transferred to you.) For more information, If you’re a member of a religious order who has
• How contributions made will be invested in see Restricted Property in Pub. 525. taken a vow of poverty, how you treat earnings
the absence of any investment decision by Dividends received on restricted stock. that you renounce and turn over to the order de-
you. Dividends you receive on restricted stock are pends on whether your services are performed
You must be given a reasonable period of treated as compensation and not as dividend for the order.
time after receipt of the notice and before the income. Your employer should include these Services performed for the order. If you’re
first elective contribution is made to make an payments on your Form W-2. performing the services as an agent of the order
election with respect to the contributions. Stock you elected to include in income. in the exercise of duties required by the order,
Overall limit on deferrals. For 2020, in Dividends you receive on restricted stock you don’t include in your income the amounts
turned over to the order.
most cases, you shouldn’t have deferred more elected to include in your income in the year If your order directs you to perform services
than a total of $19,500 of contributions to the transferred are treated the same as any other for another agency of the supervising church or
plans listed in (1) through (3) and (5) above. dividends. Report them on your return as divi- an associated institution, you’re considered to
The limit for SIMPLE plans is $13,500. The limit dends. For a discussion of dividends, see Pub. be performing the services as an agent of the
for section 501(c)(18)(D) plans is the lesser of 550, Investment Income and Expenses. order. Any wages you earn as an agent of an
$7,000 or 25% of your compensation. The limit For information on how to treat dividends re- order that you turn over to the order aren’t inclu-
for section 457 plans is the lesser of your in- ported on both your Form W-2 and Form ded in your income.
cludible compensation or $19,500. Amounts 1099-DIV, see Dividends received on restricted
deferred under specific plan limits are part of stock in Pub. 525. Example. You’re a member of a church or-
the overall limit on deferrals. Special Rules for der and have taken a vow of poverty. You re-
Designated Roth contributions. Employ- nounce any claims to your earnings and turn
ers with section 401(k) and section 403(b) Certain Employees over to the order any salaries or wages you
plans can create qualified Roth contribution earn. You’re a registered nurse, so your order
programs so that you may elect to have part or This section deals with special rules for people assigns you to work in a hospital that is an as-
all of your elective deferrals to the plan designa- in certain types of employment: members of the sociated institution of the church. However, you
ted as after-tax Roth contributions. Designated clergy, members of religious orders, people remain under the general direction and control
Roth contributions are treated as elective defer- working for foreign employers, military person- of the order. You’re considered to be an agent
rals, except that they’re included in income at nel, and volunteers. of the order and any wages you earn at the hos-
the time contributed. pital that you turn over to your order aren’t inclu-
ded in your income.
Excess deferrals. Your employer or plan Clergy
administrator should apply the proper annual Services performed outside the order. If
limit when figuring your plan contributions. How- Generally, if you’re a member of the clergy, you you’re directed to work outside the order, your
ever, you’re responsible for monitoring the total must include in your income offerings and fees services aren’t an exercise of duties required by
you defer to ensure that the deferrals aren’t you receive for marriages, baptisms, funerals, the order unless they meet both of the following
more than the overall limit. masses, etc., in addition to your salary. If the of- requirements.
If you set aside more than the limit, the ex- fering is made to the religious institution, it isn’t • They’re the kind of services that are ordi-
cess must generally be included in your income taxable to you. narily the duties of members of the order.
Page 50 Chapter 5 Wages, Salaries, and Other Earnings