Hi Cheryl S.

You can set up another income for the increased pay.  

The hours worked from Dec 21 to Dec 31 use the old income

The hours worked from Jan 1 to Jan 3 use the new increased income.

Hope this helps.  

Do I need to wait for the 2015 update so that the correct CPP and EI will be applied to Jan 1-3?

Hi Cheryl - you said ***He is on a 26 pay schedule, so this means the increase will occur in the middle of a pay period (Dec 21 - Jan 3)***

This indicates to me that his paychq will be dated for Jan3/15 or later therefore you will be using the new payroll update tables for the 2015 year. The actual date paid is the date to go by for what year to use for the source deductions (EI, CPP, IncTx) regardless of the dates of the pay period.

The whole paychq dated Jan3/15 or later for the period of Dec21/14 to Jan3/15 will be calculated using the 2015 payroll update which I believe should be available on Dec18/14.

You will need to divide his new annual 2015 salary by 26 payperiods to get the correct payperiod salary and for the first payroll take that new perperiod salary and divide it by 14 days then multiply by 3 days for the period of Jan1-3/15 and call this 'Ttotal A'. Take the old perperiod salary and divide it by 14 days then multiply by 3 days for the Jan1-3/15 period and call this 'Total B'.

Subtract Total B from the old salary and use that amount as the salary amount.

Then use Total A as the new income which can be call something like SalaryAdjust or SalAdj - I think you may be limited in the nbr of letters you can use but this income will only be used once in this type of situation.

That will adjust the old salary to finish out the old year and adjust the new salary for the first 3 days.

After that paychq has been created and posted then you can go ahead into the Pastor's employee profile and change the salary amount to the new perperiod amount for the 2015 year.

If the pastor is given another increase for the 2016 year then do the same thing as above with the adjusted new 2016 portion entered in the SalAdj income.

Hope this is understandable..

It was understandable.  Well, it was to my husband. :)  Christmas is taking a big toll on me and my brain is frying at every turn. However, I'm very grateful you responded.  Under normal, non-holiday circumstances, I follow your explanations very well. :D

My only question about this method is if the pay date actually being on December 31 will have an effect on anything?  Although the pay periods run from Sunday to a Saturday, his paycheck is always issued on the Wednesday prior.  I'm guessing no?  This is my first year as treasurer and I did not know until this week that the pay date dictates which year to use.

He also has a housing allowance, which, as of the last paycheck, was maxed out for 2014.  Am I correct to use the above method to figure out the allowance in 2015 for those three days?  We still have not received authorization from CRA giving him the Clergy Residence Deduction for 2015, so I won't be adjusting any tax on it.

It was understandable.  Well, it was to my husband. :)  Christmas is taking a big toll on me and my brain is frying at every turn. However, I'm very grateful you responded.  Under normal, non-holiday circumstances, I follow your explanations very well. :D

My only question about this method is if the pay date actually being on December 31 will have an effect on anything?  Although the pay periods run from Sunday to a Saturday, his paycheck is always issued on the Wednesday prior.  I'm guessing no?  This is my first year as treasurer and I did not know until this week that the pay date dictates which year to use.

He also has a housing allowance, which, as of the last paycheck, was maxed out for 2014.  Am I correct to use the above method to figure out the allowance in 2015 for those three days?  We still have not received authorization from CRA giving him the Clergy Residence Deduction for 2015, so I won't be adjusting any tax on it.

hmmm - if you are going to be dating it Dec31/14 then it is the 2014 payroll taxes you will want to use as it goes by when you have received the earnings. So everything still follows as previously explained except that you will be using the payroll tax table for the year the paychq is actually dated - in the case it is Dec31/14 so use the 2014 taxes.

I am not familiar with housing allowance so can't really answer that question - I doubt that you would follow the same breakdown tho. Since you have not yet receive authorization from CRA yet then technically you cannot be claiming any portion of this yet.

The Housing Allowance paid to the clergy is between the church and the clergy. If this allowance is changed at the same time as the base salary then pro-rate it the same way that Heather described for the salary.

Once the CRA has authorized a reduction in deductions due to the clergy applying for the Clergy Residence Deduction then you will modify the deductions at that time. Until the CRA authorization is received you have no authority to reduce the deductions and must deduct the full amounts.

You also have to look at the first paychq of 2014 and possible the last paychq of 2013 to see how the housing allowance was paid out. You may need to add all of the housing allowances during the year  to determine the actual total for the year to verify if it matches the amount the CRA authorized.

A housing allowance does not have to match what the CRA approves. It can be more or even less than the amount approved. The housing allowance paid is between the minister and church. The Clergy Residence Deduction is calculated totally separate and is between the CRA and the minister. The Housing Allowance is fully taxable just like the rest of the minister's pay. If the minister applies to have income tax reduced at source one step is to apply the Clergy Residence Deduction. Once the reduction is approved then it applies against the minister's full income.

If the Housing Allowance is a non-cash amount then the amount has to be added to the T4. but the CRD is still calculated separately. and the deduction still has to be applied for and approved before a reduction can take place.