If last year my income flor clergy services was on a 1099 but this year its on a W2, what should I do?

[pg5602]

This is for ministerial income, I changed positions in the same church around March of 2020.

[JeffreyR77]

You will report your W2 income in the Wage and Income section of TurboTax:

1. From Tax Home, open or continue your return.
2. In the upper right menu, select  and search for W-2.
3. Select the Jump to link at the top of the search results.
4. At the Let's start with some info from this W?2 screen, don’t enter your employer's EIN, just select Continue.
   1. Or, Add Another W-2 if you see the Here’s your W-2 info screen.
5. On the Let’s type in the rest of your W-2 info screen, you can manually enter your W-2 information.

Once your W2 information is entered, the TurboTax interview will take you through specific questions related to your clergy situation to calculate any self-employment tax liability you may have on your W2 reported income.

If you have clergy service related income besides that which is reported on the W2, you continue to report that on Schedule C and deduct any expenses related to that income.

Ministers and Taxes

[Opus 17]

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@JeffreyR77 wrote:

Once your W2 information is entered, the TurboTax interview will take you through specific questions related to your clergy situation to calculate any self-employment tax liability you may have on your W2 reported income.

If you have clergy service related income besides that which is reported on the W2, you continue to report that on Schedule C and deduct any expenses related to that income.

Ministers and Taxes

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There is a page of special circumstances after entering the W-2, check the box for religious wages, and you will be asked about any housing allowance and qualifying housing expenses.  

It is NOT correct that you continue to deduct expenses on schedule C. 

Apologies, this is somewhat complicated.

If you have income from side-jobs like weddings and funerals, that still goes on a schedule C and you can deduct work-related expenses specific to those side jobs.  That is not how you deduct work related expenses from your W-2 job.  (And in point of fact, most clergy are common law employees and should be paid on a W-2, not a 1099.)

Your W-2 should have boxes 3-6 blank, if not, you need to use special procedures in Turbotax.  Your church should NOT be withholding social security and medicare taxes in boxes 3-6.

W-2 employees used to be allowed to deduct a percentage of work-related expenses on form 2106, that is disallowed for 2018-2025 by the tax cut act of 2018.  Clergy can't deduct work-expenses from their taxable wages, but they can deduct work expenses from income subject to self-employment tax (your wages plus your housing allowance).  To do this properly, you make a manual entry on the Schedule SE Adjustment Worksheet line 5c.  You can only make manual entries using Turbotax installed on your own Mac or PC from a download or CD, you can't make manual entries online.

So let's suppose you have a $10,000 salary, a $15,000 housing allowance, and $1000 of job-related expenses.  Your taxable income for income tax will be $10,000, but your income subject to self-employment tax will be $24,000.  

(That has been the procedure for 10 years.  Hopefully I will not go home tonight and test it and find that TT has completely overhauled it.)