Clergy

[cred65]

My first attempt at preparing this type of return, so here goes.

Priest brings in a W-2 from Diocese with $19K wages in box 1 but nothing else entered in the remaining boxes except state wages. He wants to prepare Schedule C with expenses deducted. Not a statutory employee.

So how do I get the income to flow to Sch C. Or is he the one who is confused. He was not aware that he had been issued a W-2 until he came to my office.

TIA

[kcjenkins]

On the W-2 input, in the box above box 1, select 'Clergy' from the drop-down menu. Then add an SE, and on Page 2 of that form, on line 2, the W2 income should appear. Next, on the tab for Line 2, you will see line 1b, 'From Clergy Worksheet". Click on the bunny and it will add the worksheet, and on that worksheet you have several pages, where you can enter properly his expenses. Worksheet 3 is for his business expenses, but do worksheet 1 first, as it calculates the percentages the other pages use.

[cred65]

On the W-2 input, in the box above box 1, select 'Clergy' from the drop-down menu. Then add an SE, and on Page 2 of that form, on line 2, the W2 income should appear. Next, on the tab for Line 2, you will see line 1b, 'From Clergy Worksheet". Click on the bunny and it will add the worksheet, and on that worksheet you have several pages, where you can enter properly his expenses. Worksheet 3 is for his business expenses, but do worksheet 1 first, as it calculates the percentages the other pages use.

Thank you very much KC.

[MAMalody]

On the W-2 input, in the box above box 1, select 'Clergy' from the drop-down menu. Then add an SE, and on Page 2 of that form, on line 2, the W2 income should appear. Next, on the tab for Line 2, you will see line 1b, 'From Clergy Worksheet". Click on the bunny and it will add the worksheet, and on that worksheet you have several pages, where you can enter properly his expenses. Worksheet 3 is for his business expenses, but do worksheet 1 first, as it calculates the percentages the other pages use.

In direct answer to your question, it does not go on Schedule C. Ultimaltely, going by KCs directions, you will list the wages on line 7 of Form 1040,

complete a Form 2106 for any unreimbursed professional expenses,

take the IRC 265 limitation and

complete the Form SE with appropriate deduction for unreimbursed professional expenses (irrespective of the IRC 265 limitation).

While you didn't mention it, you may have to see how his housing situation is, you will see this as you fill out Worksheet #1 mentioned by KC.

[kcjenkins]

I will just add that SOME ministers may, in fact, be self-employed, and file a Sch C. Depends on the denomination, the particular set up in the church, etc. But when you said "Priest brings in a W-2 from Diocese... " that let this one out, for sure. Only option for him is filing his expenses on the 2106, although he may have some breaks on the housing side of things. the nice thing is that with the Clergy Worksheet that they added this year, it's easier to do it and get it right, and also easier to defend it if needed.

[Lion EA]

If he received direct payment for weddings or funerals or speaking or...he may have Schedule C income, also.