Retirement tax questions

For the desktop version, Deluxe has all the forms you would need for either a W-2 job or a schedule C if you are paid as a 1099-MISC independent contractor or have additional cash side income (weddings, funerals. etc.).  Home & Business has additional support and guidance for claiming expenses and may be easier to use if you have never been self-employed, but it is not required.

You will want to avoid the online versions because, depending on your exact circumstances, you may need to make direct manual entries for the clergy situation and direct entry is not available in the online product.

Some important notes for clergy.

1. Clergy are considered self-employed for employment tax purposes.  You are not subject to mandatory social security and medicare tax withholding, and income tax withholding is optional and usually not done.  That means you have to make quarterly estimated tax payments.

2. If you answer to the congregation (via direct vote or a board of some kind) or a denomination (like a bishop or district or diocesan council) then you are a common law employee and should be paid on a W-2.  Box 1 will have your wages and boxes 2-6 are typically blank.

3. You can ask your church to designate all or part of your salary as a clergy housing allowance.  As long as the housing allowance is equal or less than your qualified housing expenses, it is exempt from income tax!  (The housing allowance is still subject to self-employment tax, though.)  This must be done in advance and in writing.

4. You can deduct unreimbursed work expenses in two places.  As schedule A itemized deductions subject to the 2% rule like any other employee, but also as an adjustment to your self-employment tax.  This is what requires making manual entries.  But the expenses are limited by the Deason rule.

Read more about all these issues here http://www.ecfa.org/PDF/2016-Preparing-Tax-Returns-For-Clergy.pdf


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