Parsonage Income
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This section includes information about income received as parsonage income paid by a church or other organization to church professionals.
Policy
Parsonage income is money paid by a church or other organization to church professionals for their expenses incurred while providing a service. Parsonage income is countable and may be considered self-employment or as wages and salaries.
Countable income is used to determine an income budget. (See Income Budgeting to see how FAA determines the income budget.) FAA needs to know about income that is both countable and not countable to determine whether a budgetary unit’s expenses are exceeding their income. (See Income Eligibility for more information about how FAA uses countable and not countable income.)
Parsonage income is in addition to money paid for services rendered. Church professionals include, and are not limited to any of the following:
●Clergy
●Ministers
●Priests
Parsonage income is considered self-employment when any of the following are met:
●There is no employer-employee relationship
●The participant is working from one’s own recognizable business, trade, or profession
●The participant works for a business or another person on a commission basis, but pays own withholding taxes for state, federal, and FICA
Self-employed participants may be eligible for a 40% expense deduction from income. To be eligible for the 40% Self-Employment Expense Deduction, only one allowable expense must be verified. When self-employment expenses are not verified using the verification process, eligibility is determined without those expenses.
Parsonage income is considered as wages when the participant is employed by the church.
Verification
The participant has the primary responsibility for providing verification. (See Participant Responsibilities – Providing Verification for additional policy.)
For NA, all of the following income is required to be verified before eligibility is determined:
●Reported on a new application, during the interview of a new application, or changes reported before the eligibility determination of a new application.
●Changes after an eligibility determination of a new application (e.g., a renewal application, mid approval contact, etc.) and any of the following apply:
The source of the income has changed.
The income is questionable(g) or unclear(g).
The reported income amount has changed by $51 or more.
The previous verification in the case file is more than 59 calendar days old.
For CA, all income is required to be verified before determining eligibility.
Self-employed participants may be eligible for a 40% expense deduction from income. To be eligible for the 40% Self-Employment Expense Deduction, only one allowable expense needs to be verified. When self-employment expenses are not verified using the verification process, eligibility is determined without those expenses.
Examples of verification that can be used for self-employment income and expenses include, and are not limited to, any of the following:
●Bookkeeping records
●Business ledgers listing income amounts received and expenses incurred
●Actual receipts
●Contracts for work
●Statements from patrons and companies
●Most recent Internal Revenue Service (IRS) U.S. Individual Income Tax Return (1040) form. Below are common IRS Schedule forms that the participant may provide in addition to the 1040:
Schedule C, Profit or Loss From Business
Schedule E, Supplemental Income and Loss
Schedule F, Profit or Loss from Farming
Schedules B-1, C, D, K, K-1, K-2, K-3, and M-3 of IRS U.S. Return of Partnership Income (1065) form (See Limited Liability Company (LLC) Definition for more information about LLCs.)
NOTE The most recent IRS 1040 and Schedule forms can be used as verification of self-employment income and expenses when the participant indicates it accurately reflects the participant's current income.
●Rent or mortgage receipt for business property
●Property tax statements for business property
●Utility costs for business property
●Cleaning cost bills for business property
●Business location and equipment maintenance
●Personal records indicating personnel salaries or costs of outside labor, such as canceled checks and payroll checks
●Participant’s statement for self-employment income, when one of the following apply:
Other attempts to obtain verification have failed.
Obtaining documented or collateral contact verification may cause harm or undue hardship(g) for the participant.
NOTE Participant statement verification may be used to verify self-employment expenses unless questionable(g).
Examples of verification that can be used for Parsonage income when paid as wages to an employee include, and are not limited to, any of the following:
●Arizona State Retirement System (ASRS)
●A copy of a paycheck stub
●Copy of checks when the gross earnings are listed
●A printout from a third party payroll verification source provided by the participant
●Written tips record
NOTE FAA staff use the dollar amount of tips shown on a paycheck stub unless the participant claims a different amount and that amount is verified. Document the case file with the reason the paycheck stub amounts were not used.
●Third Party Payroll Verification Sources when the employer uses the verification source as its legal agent to provide payroll services or respond to inquiries about employee records. Third party payroll verification sources approved by FAA includes all of the following:
●Equifax/EMVI
●Corporate Cost Control (CCCVerify)
●Verify Advantage (formerly known as VerifyDirect)
●A New Employment Verification (C005) notice that is completed, dated, and signed by the employer or their payroll authority. The statement has to include all of the following:
Name, address, and telephone number of the employer
Gross pay for the periods needed
Frequency of pay, and day of the week pay is received
Any expected changes in pay
●For new or current employment verification, a completed Verification of New/Current Employment (FAA‑0053A) form that includes a date and the signature of the employer or their payroll authority
●For terminated employment verification, any of the following completed items that include a date and the signature of the employer or their payroll authority:
Verification of Terminated Employment (FAA-1701A) form
Verification of Terminated Employment (C019) notice
●A collateral contact with the employer or their payroll authority
NOTE Other means of verification are used when contacting the employer would jeopardize the participant's employment.
●Participant statement verification when any of the following occur:
Other attempts to obtain verification have failed
Obtaining documented or collateral contact verification may cause harm or undue hardship(g) for the participant.
NOTE A participant’s statement is not allowed to verify income when it is considered questionable.
Legal Authorities
AAC R6-12-501-503
A.R.S 46-292-P01
7 CFR 273.9(b)(1)(i)
7 CFR 273.9(b)(1)(ii)
7 CFR 273.9(c)(1)
7 CFR 273.9(c)(1)(vii)(B)
7 U.S.C 2014 (d)(1)
7 U.S.C 2014 (d)(9)
last revised 10/02/2023