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If I started the year as a minister, with a housing allowance, but in August I stopped being a minister and working for a for-profit company...am I self-employed or not?

I began the year as a minister working for a church. Most of my income was marked as "housing." I was paying estimated taxes. Then in August, I started working for a for-profit employer, and my taxes were withheld. I continued to pay estimated taxes in September, just in case. More than 1/2 my income for the year was for the for-profit employer.

1. Am I considered "self-employed" for tax purposes? The whole year, or just partial?

2. Are my housing expenses for the whole year tax-exempt, or just while I was a minister?

3. What occupation should I enter on my 1040?

4. Any other pitfalls I should worry about?

Thanks in advance.

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If I started the year as a minister, with a housing allowance, but in August I stopped being a minister and working for a for-profit company...am I self-employed or not?

You don't need the self employed version.  Although pastors are considered self-employed for some tax purposes, they are common law employees for most other tax purposes and should receive a W-2.  Because pastors are exempt from employment taxes and withholding and make estimated payments instead, your W-2 will generally have your taxable (non-housing allowance) income in box 1, with boxes 2-6 blank.  The housing allowance may be reported in box 14, or in a separate memo from the treasurer.  In turbotax, after entering your pastor W-2, there is a page for "special circumstances."  Check the box for religious wages, provide the amount of your housing allowances and your qualifying housing expenses, and answer that you need to pay self-employment tax on both the wages and housing allowance.

Your qualified housing expenses are only those expenses incurred while you were performing religious duties that also allow you to have a housing allowance in the first place.  Generally, you must be in a position where you perform sacraments, minister to the congregation, and manage the operation of the church.  A pastor in a position with non-religious duties (college professor, janitor, etc.) is not eligible for a housing allowance even if they have a pastoral degree or license.

If the amount of housing allowance you received is more than your qualified housing expenses from the part of the year you had religious duties, then the excess will be added back to your taxable wages.

It doesn't matter which job you list under "occupation."  That field has almost no importance and is not routinely used for anything by the IRS.  List pastor, or list your new position, it's not terribly important.

Turbotax Deluxe will generally be enough to handle your situation, unless your church issues you a 1099-MISC instead of a W-2.  (This is probably wrong of them, but is a discussion for another time.)  If you are issued a 1099-MISC, you will need the self-employed version.

If you want to deduct pastoral expenses from your pastoral wages (mileage, books, etc.) you have to adjust your deduction to account for your housing allowance according to the "Deason rule."  This is not supported by Turbotax and will require that you use Turbotax installed on your own computer (not the online program) so you can make manual adjustments to certain forms.

Also see this http://www.ecfa.org/PDF/2016-Preparing-Tax-Returns-For-Clergy.pdf


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