Directions provided at "How do I enter a parsonage or housing allowance on a 1099-R?" do not seem correct to me. Let me explain:
1099-R: box 1=$75,000, box 2a=empty, box 2b=empty. Entry using Easy Step places income on Form 1040 lines 5a and b: 5a = $75,000. 5b = $0
The housing allowance distribution as reported on the 1099-R properly reports it on Form 1040 as tax exempt income. Of the $75,000 distributed, I can support exemption of only $71,550 (i.e. $3,450 becomes additional reported income).
To follow the instructions provided at link does the following:
- Leaves Form 1040 lines 5a and b UNCHANGED.
- Lowers other taxable income by $71,550 (which generates a sizable unearned tax refund!) Oh, I wish it were true.
Rather, I think I need to ADD the $3,450 of now taxable income and add the text UNUSED Clergy Housing Allowance. This does the following:
- Leaves Form 1040 lines 5a and b UNCHANGED.
- Increases other taxable income by $3,450 (which results in a commensurate increase in federal income tax ~$800 because the $3,450 is no longer tax exempt!)
Help me if I'm wrong; but I must say I believe the advise given at the link is wrong.
