clergy tax unreimbursed expenses

[ol_run]

Hello, I am considering using TurboTax for my clergy taxes this year. One thing I have a hard time figuring out is where to enter the unreimbursed expenses. My previous tax preparer used Worksheet 1 (Figuring the Percentage of Tax-free Income), Worksheet 3 (Figuring Net Self-Employment Income for Schedule SE) and Worksheet 4 (Figuring the Allowable Employee Business Expense Deduction). Does Turbo Tax has support for this? And if yes, which version?

[Opus 17]

No, turbotax does not have the special worksheets needed for clergy.  You would have to figure out the amount of allowable expenses and then make a manual entry.

Briefly, you probably already know that you can't deduct unreimbursed expenses from your income subject to income tax.  That deduction was removed in 2018.  You can subtract your expenses from income subject to self employment tax but the amount is subject to the Deason rule (which looks like worksheet 1 in publication 517).

https://www.irs.gov/pub/irs-pdf/p517.pdf

You figure the percentage of your income that is taxable and apply that to your work expenses (that's probably worksheet 4, although that worksheet is not in the current version of publication 517).   For example, if your W-2 salary is $30,000 and your housing allowance is $20,000, then 60% of your income is subject to income tax and you can deduct 60% of work-related expenses from your income subject to SE.

After you calculate the allowable deduction for work-related expenses, that is entered as a manual entry.  You can only make manual entries by using Turbotax as a download installed on your own computer. Switch to Forms mode and locate the Schedule SE adjustment worksheet.  The allowable work expenses are entered on line 5c of that worksheet, and Turbotax will apply the adjustment to the numbers on Schedule SE.  

[ol_run]

That makes sense, but to manually enter the correct number, I need to modify the value in column 10 of Form 2106, which is a "read-only" field. Is there a way to make it editable?

[Opus 17]

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@ol_run wrote:

That makes sense, but to manually enter the correct number, I need to modify the value in column 10 of Form 2106, which is a "read-only" field. Is there a way to make it editable?

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You can't include form 2106 with your tax return.  The deduction for work-related expenses was eliminated in 2018 and forward, except for certain military personnel and qualified performing artists.  If you enter your expenses in form 2106, they won't be reported on your federal tax return because they aren't allowed.  You can print out and use a copy of form 2106 if that is convenient to figure your deductible expenses, but the only thing you enter in Turbotax is the adjusted expense amount on line 5c of the schedule SE adjustment worksheet.  The IRS instructions for clergy say to keep a copy of your calculations in case they want to see them, but it does not have to be on form 2016.

There are some states that still follow the pre-2018 tax rules and allow a state itemized deduction of work-related expenses.  In that case, you would use the work expense interview in turbotax, even though the federal form 2106 won't be filed.  There are two ways you could use this interview to report your expenses.

1. Just report a percentage of everything.  If your deductible percentage is 60%, you would enter 60% of your mileage and 60% of your other expenses -- do the adjustment before the interview and enter the adjusted numbers, rather than enter the real numbers and adjusting them later.

2. Or, you can perform an override on the tax form in Turbotax Desktop by switching to Forms mode.  I don't know where to tell you to make the override.  It might be on a different worksheet, or it might be directly on your state's version of Schedule A.  However, tax forms with overrides can't be e-filed (IRS rule) so you would have to print and mail your return.  And overrides may void the 100% accurate calculation guarantee.  

(Some places allow you to enter numbers, like line 5c, because they do not disturb the calculations on the worksheets, just provide extra information.  An override blocks the calculation and substitutes your answer.  That's why a manual entry on line 5c of the worksheet does not block e-filing, but overriding the calculated deduction on your state return does block e-filing.)