Housing allowance and business deductions

[pjwillis]

I am a clergyman and have housing allowance. I received a 1099 from my supporting church. I know where to put the housing allowance amount in turbo tax , but I am concerned about the self-employment/business deductions. When I put the full amount of the deductions in the "business" section to calculate SE taxes  , does the turbo tax program calculate the proper percentage to put in the Schedule C according to the deason rule? 

[MarilynG1]

No, you will need to make manual adjustments for amounts of expenses you were reimbursed by your church for.

Click this link for more info on Using TurboTax for Clergy Taxes. 

[pjwillis]

What do you mean by "manual adjustments"? If I have meals, mileage, lodging, travel, etc, for the work that I do for the ministry, where do those expense amounts go? 

[MarilynG1]

Those would be reported as Expenses on your Schedule C.   

Manual adjustments refers to adjusting those entries by any amount you were reimbursed for.

[pjwillis]

So if I input those amounts in my turbo tax program under "let's write off some business expenses" in the "business and income" section do those go on my Schedule C? 

[pjwillis]

If I lump my love offerings and any reimbursements (i.e travel expenses) that I receive from a church into my total business income then all my "expenses" would be deductible business expense since I am not removing those up front, correct?

[MarilynG1]

Yes. 

Click this link for more info on Reporting Self Employment Income and Expenses. 

[pjwillis]

that's what I thought, but where does this whole percentage debate/issue (deason rule) fit in if you are receiving a housing allowance and where is that calculated in the turbo tax program?

Are you allowed to call me? [phone number removed]

[MarilynG1]

No, we are not allowed to call you and we can't see your tax return in this forum.

You can request Phone Support or a Live Review.

Here's a link to Preparing Tax Returns for Clergy that may help you. 

[pjwillis]

Did you receive the last communication? I just want to make sure I am following the rules as it pertains to expenses and how it effects business deductions and SE taxation with this whole deason rule issue. I put all the info in as you said, but when I did the review at the end it caused the audit barometer to peg out in the red (high). 

Is this turbo tax program not capable of dealing with this kind of situation for clergy?

[JotikaT2]

It looks like you are using the TurboTax Home & Business CD download version of the software.  That is your best option as far as reviewing what is picked up on the forms.

As far as the deason rule and applying this principle to your situation, you do have to manually determine how much of your expenses are related to taxable income versus tax exempt income as previously mentioned.  There is not anything wrong with the program. The information you input just needs to be reflected accordingly since you have both tax-exempt income on your Schedule C along with fully taxable income. 

If you do not do this manual adjustment, you would be taking a double dip into the deductions since some of the income for the housing allowance is not subject to income tax.

The Schedule C warning is there as a help tool.  But if you have all of the supporting documentation for your deductions, you have every thing you need to support your deductions reported on Schedule C should the taxing authorities ever request additional information.  Just be sure to retain your support with your return.