I am a retired clergy person and am able to use Section 107 of the Internal Revenue Code to exclude my pension but need to put a note on line 5 of the 1040. How??

[circuitrdr]

The amount I am compensated by our board of pensions is excluded from taxable income but I want to put a note along with my return to ensure the IRS knows why the amount reported on my 1099-R is not showing up as taxable income. How can I post a note along with my return so that I can still electronically file my return?

[DianeW777]

The IRS allows a housing allowance to retired ministers to the extent the recipient can justify the amount. Should you receive more than you can justify, the excess should be considered taxable.

You may include this statement with an electronically filed return using the instructions below.

To access the entry fields for the 1099-R:

1. From within TurboTax, scroll down the Wages & Income List
2. In Category Retirement Plans and Social Security  select  IRA, 401(K), Pension Plan Distributions (Form 1099-R).
3. Add a 1099-R to create a new copy of the form or Click Edit to review a form already created.
4. The program will proceed with the interview questions for you to enter or review the appropriate information. Enter the data from the 1099-R 

If Box 2b is not checked, please enter the 1099-R exactly as it appears on the form. This will cause the full amount to show as taxable. You will make your adjustment in Other Income, following the instructions below:

1. Open your Federal return and choose Wages & Income
2. Scroll down to Less Common Income and Show more
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other reportable income, and Start/Revisit
5. Select Yes and you will be prompted to enter Description and amount. Enter the description "Retired Minister Housing Allowance," and enter the amount as a negative number.   

At this point, the form 1040 will show your full pension as taxable, but the negative adjustment on Schedule 1, line 8, which carried to Form 1040, line 8, will remove it from taxation.  Remember you can only enter an amount equal to your housing expense if it is less than your actual amount received.

• Note: You may file a paper return with an attachment stating that you received an exempted housing allowance as a retired clergy member.  Be sure to include the amount received. You should keep documentation in your records to justify the amount of the housing allowance. This subject is covered in IRC Section 107, which you can mention in your statement. 

 Remember you can only enter an amount equal to your housing expense if it is less than your actual amount received.

• IRS Publication 517

@circuitrdr

[Edited: 04/06/2024 | 7:40 AM PST]