Need help with Schedule SE for a church school employee.

[jhshiff]

My daughter-in-law's church school did not list SSA or Medicare on her W-2. They say to file Schedule SE. I do not see a way in TurboTax Premier to do that.

[VolvoGirl]

Did she get a W2 or a 1099NEC?  To get Schedule SE you need to fill out Schedule C for self employment income.  You can enter 1099NEC or Self Employment Income into Online Deluxe but if you have any expenses you will have to upgrade to the Premium or use any of the Desktop CD/Download programs. All the Desktop programs have the same forms, so you can buy a lower version.  You just get more help and guidance in the higher versions.

How to enter income from Self Employment

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

[jhshiff]

Thanks for the quick reply. I am using TurboTax Premier on my Windows desktop. My daughter-in-lay received a regular W-2 for her teaching job, with no entry in the Social Security or Medicare boxes. The school gave her instructions that say "The amount necessary for [Social Security] taxes has been withheld from your paycheck, but all this money has been paid to the IRS is therefore listed on your W-2 under Federal Income Tax. In this way you have enough extra paid in taxes to cover the self-employment Social Security. Schedule SE must be included in your tax return." 

I do not see any links in TurboTax that will let me create the Schedule SE. The instructions under "self employed income" do not appear to be appropriate for a Church School Teacher!

[VolvoGirl]

Gee I don't know.  That sounds strange.  If they are filing a W2 they should be putting it in the right boxes 3-6.  Is box 13 checked for statutory employee?  

[jhshiff]

No - nothing in Blocks 3-6 or Block 13. I have a call in to someone from the school. I hope they know what to do!

[RobertB4444]

After you have entered the W2 into TurboTax as it is then you will come to a screen that says 'Let's check for some uncommon situations".  Scroll down and check the box that says 'Religious employment'.  The system will walk you through everything that you need to do from there and will include the schedule SE for her.

Religious organizations have different rules for how they need to handle payroll taxes.  Your daughter is about to find that out.

@jhshiff 

[jhshiff]

I did that, then I checked "Nonclergy" on the next screen, then I checked "Social Security ... have already been withheld (because the letter she got from the school says "the amount necessary for these taxes [Social Security] has been withheld from your paycheck, but all this money has been paid to the IRS and is therefore listed on your W-2 under Federal Income Tax" Now I am going to try changing that to "Pay self-employment tax on this W-2 income" and see what happens. That reduced the refund due by $1,219! It did indeed create a Schedule SE, so I think I am good now. Thanks for your help.

[jhshiff]

I still think there is a problem here. Line 8a of the Schedule E has a number ($2690) that I can not change. It says it should be the sum of boxes 3 and 7 from her W-2 - those numbers are both ZERO.

[DianeW777 · Accepted solution]

The church school is treating your daughter in law as though she is clergy.  However, since they withheld all the taxes and placed them in Box 4, they have treated all of the social security and medicare taxes as part of her federal withholding instead of actually paying the tax to the IRS as required.  The W-2 clearly indicates your daughter in law is considered as being in a clergy position.  She will need to sort that out with the church school administration.

The solution is to complete the W-2 exactly the way it is.  As previously noted, you must go to the page 'Let's check for some uncommon situations'.  Scroll down and check the box that says 'Religious employment'. You must check 'Clergy' on the next screen, next do not enter anything in Parsonage or Housing or Qualifying expenses.

Next on the screen 'Now tell us about your clergy self employment taxes' check 'Pay self employment taxes on my wages'.

Regardless of the refund, the church said they withheld these taxes and they are included in Box 4. This is the confusing part for you and it should be unless your daughter in law actually is considered clergy by the church.  If she is not, then they should not be paying her using clergy rules. She is paying all of the taxes (employer and employee) by the church withholding it from her wages.

There is an option to pay only the employee share of the social security and medicare taxes ONLY if your daughter in law is not in a clergy position. I will show the information below.

• How do I fill out a substitute W-2?
  • This would require that only the employee share be paid and the IRS would go after the church school for the employer share of the taxes.  This may not be what the church school would want.

@jhshiff