@paulnue wrote:
I'd like to anticipate this same situation as a clergy under contract for 2020. I've looked at the 1099-MISC for 2020, and there is not no longer a line 7 for nonemployee compensation. Will the church use line 3 for "Other income"? And will it report base salary only? No reporting of Housing Allowance at all?
For 2020, the IRS has created a new form called 1099-NEC, specifically for non-employee compensation (compensation for work performed when the worker is not an employee). Non-employee compensation will be in box 1 of form 1099-NEC. 1099-MISC will only be used for other kinds of taxable payments (royalties, prizes, etc.)
My previous comments still hold: most pastors are not 1099 contractors. If your position is under the control of the church or denomination (directly or via a board of elders; they hired you, set your hours, and can fire you or "revoke your call") then you are a common law employee and must be given a W-2, even though you are considered self-employed for some income tax purposes. You might legitimately be a contract pastor if you are a vacation fill-in or something like that, but probably not if you are the regular pastor.
A housing allowance must be approved in advance and in writing by the church (or their designated board of elders, etc.) Therefore, it is not clear to me that it is even legal to be a "self-employed" 1099 pastor and receive a housing allowance--how can you be self-employed but still have a board that can legally vote a housing allowance--but I haven't seen any Tax Court cases denying it. Once the housing allowance is approved in advance and in writing, it is not reported on any tax forms, it should not be included in your 1099-NEC box 1 compensation. The church should report it separately in a letter or memo from the finance committee or treasurer. You are required to voluntarily report the housing allowance on your tax return. The housing allowance is subject to self-employment tax but not income tax.
As stated above, if you are paid on a 1099-NEC, you will need the self-employed version of Turbotax. Start the business section and use code 813000. This will trigger a question about your housing allowance. Most of the time you will check the box for "pay SE tax on both compensation and housing" and you enter the amount of your housing allowance and the amount of your qualified expenses. (Your qualified expenses can't be more than the housing allowance. If the expenses are less than the housing allowance, the difference is added to your taxable income as well.)
You will want to review the tax resources at ECFA.org, your denomination may be a member allowing you free or discount access.
https://www.efca.org/resources/document/preparing-tax-returns-clergy
https://www.ecfa.church/Content/2020-Zondervan
