Get your taxes done using TurboTax

PRESENTED BY S_C - NOT AN INTUIT EMPLOYEE NOR AN APOLOGIST FOR TURBOTAX

2018 Tax Year - 2019 Update

Here follow the processes according to the Internal Revenue Code for Clergy as to different situations.

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LINE BY LINE INSTRUCTIONS FOR ENTERING CLERGY HOUSING - SCROLL TO BOTTOM
[Retired Clergy may be entitled to the same Housing Exemption - Scroll to the Bottom]

Clergy face a difficult accounting in calculating taxes.  

Do you have income reported on W-2 or From 1099-MISC?  

It is an option of the church as to how you are considered as an employee or self-employed.

Clergy housing, also known as Parsonage, is not subject to Federal Income Tax but is subject to the FICA Social Security Tax and to Medicare Tax [this is the equivalent of Self-Employment tax]

Your parsonage [being either that designated by your church, or agreed to, or a reasonable statement of housing cost in the area of the church] is not subject to Income Tax and but are subject to FICA and Medicare Tax.

                         "housing allowances" =  parsonage.

Housing expenses -  Other costs for housing over and above the "allowance"?  If a reasonable statement of what it housing costs are in your church's area, you may find the following of interest as it would suggest the reasonable cost is deductible even if the "allowance" did not cover it. 

"A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable compensation for the minister's services."

"For social security and Medicare tax purposes, a duly ordained, licensed or commissioned minister performing ministerial services is considered to be self-employed. This means that your salary on Form W-2, the net profit on Schedule C or C-EZ, and your housing allowance, less your employee business expenses are subject to self-employment tax on Form 1040, Schedule SE"

Alternatively if you received a Form 1099-MISC Box 7 and not a W-2, Enter the 1099-MISC as business income. For the principal business code, use 813000 (religious organization). After you enter that business code you will get a screen about clergy income. Select "I Need to Pay Self-Employment Tax on This Income." The next screen will ask you to enter the amount of your housing allowance. Continue through the business interview and enter your 1099-MISC.

If you report clergy income and your employer does not pay Social Security and Medicare tax, you must:

• pay these taxes yourself in the form of self-employment tax or
• be granted an exemption on Form 4361 or Form 4029.

Your housing allowance is not subject to regular income tax (to the extent that you use it for qualified housing expenses), but it is subject to Social Security and Medicare (self-employment) taxes.

LIMITATION: For those clergy who have Employee Business Expense to report,  Turbotax does have the ability to include a housing allowance or FMV parsonage in SE tax, but lacks is the ability to calculate the correct adjustments for work-related expenses to schedule SE and form 2106.

How to enter a clergy housing allowance -  Form 1099-MISC

Form 1099-MISC Box 7:

After entering the Form 1099-MISC data in to the Interview, you will need to make an adjustment to reduce the Income Taxable Amount by your Housing Allowance.

• From YOUR INCOME SUMMARY page
• Scroll down the list to "Less Common Income" and select  "Miscellaneous Income"
• Select "Other Reportable Income"  
• To the question   "Any Other Taxable Income"  answer "yes"
• Enter for Description = "Clergy Housing Allowance" and for amount - as a negative amount the housing allowance amount.
• This adjusting entry will appear as a negative amount on Page 1 of Form 1040 line 21 with description showing.

How self-employment tax is calculated on clergy income

TurboTax calculates clergy self-employment tax and prepares Schedule SE (Self-Employment Tax) based upon:

• The selection you make on the Clergy Self-Employment Tax screen: 
  

• SEE IMAGE

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  s/ Scruffy Cumudgeon ® ™