I am a minister and am considered to be self-employed for both income and self-employment taxes. I get a 1099, not a W2.
I am trying to apply the Deason Rule by prorating my business expenses on Sked C by the percentage of my housing allowance to the total income. Most of the advice I've read on the Deason Rule says to add the amount of the housing allowance to the net of Sked C to determine the amount of Sked SE income. Basically as follows:
Original 1099 income: 40,000.00
Housing Allowance: 10,000.00
% of housing allowance: 25%
Business Expenses: 5,000.00
25% of Expenses as per Deason Rule: $1,250.00
Reduced Expenses as per Deason Rule: 3,750.00
Net Business Income on Sked C: 26250.00
Most instructions then tell you to add the housing allowance back in to get the income to place into Sked SE. In this example:
Income on Sked SE, Section A, Line 2: 36,250.00
Turbo Tax Home and Biz adds back the housing allowance properly for Sked SE, although you have to do the Deason reduction manually.
However, in searching the web extensively, some instructions imply that there is an additional calculation that can occur to reduce taxes: For example at https://ttlc.intuit.com/community/business-taxes/discussion/i-am-a-clergy-but-receive-and-enter-wage... , @Opus 17 implies this and makes reference to the "Deason Rule Adjustment" which has to be made manually in Turbo Tax in Forms mode. However, the details of the Deason Rule were not within the scope of that post, and he suggested that further inquiries of the Deason Rule be made in a separate post.
Another clue that I have for this calculation is our 2009 taxes, which were done by a tax preparer who was knowledgeable in the implementation of the Deason Rule. However, 2009 was his last year before he retired and so I no longer use him.
Anyway, he took the amount of the reduction, in this case: 1,250.00 and subtracted it from the adjusted total for Sked SE. In my example, the new adjusted total for Sked SE, Line 2 became: $35,000.00
He then wrote out an explanation citing the Deason Ruling Court case and showing the reductions that occurred and how he determined the amount on Line 2. This explanation was on a separate page, which he attached to our return.
My questions are this:
1. Does anyone know if this is a valid way to calculate income for Sked SE? Our preparer had done it this way for 14 years and we were never audited on it. However, I fully recognize that last return he did for us was 10 years ago, and I don't think anything has changed, but I want to make sure before I go doing things this way. (I will include the wording of his statement in a comment below)
2. Since Turbo Tax isn't doing this automatically, I will have to go in on Forms mode to make the change. However, I would also need to attach this statement and the corresponding calculations. Am I to assume that there is no way to add this statement to TT, and so I will not be able to file electronically?
Thank you for any help you can give.
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