Designated and qualifying Housing Allowance payments are considered “nontaxable” income (ministers still have to pay SECA taxes on it …in their personal tax return…unless they have “opted out” of Social Security)and the church should NOT be withholding taxes from those payments.
Those nontaxable payments can be reported in BOX 14 on a W-2 as that is just an “informational” box and just for the employee’s information only.
Their “regular” salary/wages should be reported in Box 1 and the income taxes withheld can be reported in Box 2. Nothing should be reported in Boxes 3-6 on a minister’s W-2
P.S. I hope that you are referring to income tax withholdings and not FICA as you can not withhold and match FICA on a minister’s compensation.
Regardless, if you just paid a housing allowance and withheld any kind of taxes…you will need to consult a knowledgeable CPA or tax professional to correct the error.
