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Opus 17 · ‎February 7, 2023

@Gen_Joab wrote:

Thanks for lending your expertise. I use the desktop software, and it does create a Form 2106 worksheet and form during the interview process, though it does not actually file it as a form, since that would only be for those itemizing. However, I then take the total calculated on this form, and that's what I enter as a manual adjustment for unreimbursed clergy business expenses on my form SE adj. worksheet. But, since I can claim these expenses on my form SE, what I need to know is can I deduct the cost of my meals while traveling, since there is a line for that on Form 2106 and Pub. 463 allows for meal deductions? If I can deduct it, why doesn't TT add it to the total expenses calculated on the Form 2106 that it generates?
Bottom line, when I make the adjustment on my SE adjustment worksheet, do I include the cost of unreimbursed meal expenses from traveling?

I'm not quite clear on your questions. You previously indicated you were self-employed. Why are you using form 2106?

Let's start over. Pay attention to the difference between employee expenses and self-employment expenses, and the difference between a deduction from taxable income (on schedule A) and an adjustment to income subject to SE tax.

Most clergy are common law employees of their church and should receive a W-2, although they are exempt from withholding so boxes 2-6 should be blank. When entering your employee wages, you would check the box for religious wages on the page listing special circumstances, and enter your housing allowance, if you have one (you should, but that's an essay for another time).

Clergy might also have self-employment income, if they are a traveling missionary part of the year, or if they perform weddings and funerals outside of their regular duties and are paid separately.

A clergy schedule SE will list all their taxable income, including W-2 wages, the housing allowance, and self-employment income from schedule C.

Unreimbursed expenses are handled in 3 ways.

1. Employee expenses related to the W-2 job would be listed on form 2106, but they are not deductible for 2022. Expenses on form 2106 must also be reduced according to the Deason rule, if you have a housing allowance in addition to a salary. Turbotax does not do the Deason rule calculation, you must do this yourself. However, work-related expenses may not be deducted against taxable income on schedule A for 2018-2025, with or without a Deason rule adjustment.

2. If you also have expenses related to the self-employment portion of your job, you deduct them on schedule C. You must allocate work expenses based on the job--if you travel to a church conference as part of your main job, you must treat that as an employee expense of your W-2 job, you can't treat it as a schedule C expense even though the expense deduction is better. You can only deduct travel on schedule C if it is directly tied to the schedule C income/business activities. If expenses are applicable to both, you must allocate them on a pro-rated or percentage basis.

3. All your clergy expenses may be deducted against income subject to self-employment tax on schedule SE, even if they are not allowed on schedule A, and no Deason rule adjustment is required. Expenses that were allocated to schedule C will automatically be subtracted from income subject to SE tax because of how schedule C works. Unreimbursed employee expenses must be manually deducted from income subject to SE tax using the Schedule SE Adjustment Worksheet line 5c.

You were previously asking about travel expenses and the MEI rate on schedule C, or so I thought. You say you are using form 2106 to add up your work-related expenses and then enter them on the SE adjustment worksheet. That seems ok, although kind of pointless, you could just as easily use a spreadsheet or a pencil and paper. The only thing you gain by using the 2106 interview is that Turbotax will calculate the mileage deduction for you instead of having to do it yourself. If you add up your work-related employee expenses (using whatever method) and enter them on the adjustment worksheet line 5c, you are finished as far as I can tell.

Then you start talking about form 2106 and pub 463 which I don't understand. Notwithstanding anything in pub 463, employee travel expenses are not deductible against taxable income using form 2106 and schedule A because of the 2017 tax reform law. (The only reason Turbotax keeps form 2106 at all is that some states allow itemized deductions and the state form auto-fills from the federal form. No matter what you enter on form 2106, it will not affect your federal income tax. If form 2106 has a calculation error, that's a relatively low priority for Turbotax to fix at this point.) Self-employment travel expenses are deductible on schedule C using the rules in publication 463. Clergy (only) can also deduct employee travel expenses on the SE adjustment worksheet. Clergy travel expenses are calculated using the same rules as self-employment travel expenses in pub 463, even though they are not deductible on form 2106 and schedule A.

Bottom line:

You can't deduct any employee travel expenses against taxable income on schedule A.

You can deduct self-employed travel expenses that are directly related to your schedule C work on schedule C, and that will automatically be reflected on schedule SE and the schedule SE worksheet.

Clergy (only) can deduct employee travel expenses from their schedule SE income subject to SE tax using the SE adjustment worksheet line 5c. How you calculate your travel expenses is up to you. If form 2106 doesn't seem to be working, use another method. Keep records for at least 3 years in case of audit.

I hope that answered your question.