Help with Clergy Worksheets

[HV Ken]

I have a W-2 for a Pastor. It has Box 1 Wages and in Box 14 it has "MNHSE" and a value, which is the value of his Housing Allowance. I placed this value in Box 14 W-2 under "House Allow" in the W2 input.

Pastor pays rent, utilities, expenses, and the total was very close to the allowance.

Worksheet 1

W-2 salary goes into 1.

Schedule C gross income goes into 2.

Value from W2 Box 14 goes into 4a. Expenses go into 4d, 4e; there is a small excess allowance in 4i.

On worksheet 4, it seems pastor is getting SE tax on his W-2 income, Sch C profit, and housing allowance. Is this how it is supposed to work?

Thanks!

[kcjenkins]

Only the 'excess' Housing Allowance would be subject to the SE tax. Both the other items would.

[HV Ken]

Only the 'excess' Housing Allowance would be subject to the SE tax. Both the other items would.

That's what we thought, but the worksheet is applying SE to the entire allowance and not merely the excess. Any idea what we are doing wrong filling in the worksheet?

[MAMalody]

I have a W-2 for a Pastor. It has Box 1 Wages and in Box 14 it has "MNHSE" and a value, which is the value of his Housing Allowance. I placed this value in Box 14 W-2 under "House Allow" in the W2 input.

Pastor pays rent, utilities, expenses, and the total was very close to the allowance.

On worksheet 4, it seems pastor is getting SE tax on his W-2 income, Sch C profit, and housing allowance. Is this how it is supposed to work?

Thanks!

That is correct. His housing allowance is not be subject to income tax, to the extent used and not to exceed the FRV. However, all his clerical income would be subject to SE tax, unless he was exempted through and approved Form 4561. You may also reduce this clerical income by any unreimbursed professional expenses, irrespective of any IRC 265 limitation. Of course, any Sch C net profit would also be subject to SE tax. I hope this helps.

While I do not know all the answers, I do specialize in clergy taxes, and I would be happy to help with any questions in any way I can. You may contact me at [email protected]. You should be advised, if you do contact me directly, you will lose the benefit of peer review that this message board makes availaible.

Mike

[HV Ken]

That is correct. His housing allowance is not be subject to income tax, to the extent used and not to exceed the FRV. However, all his clerical income would be subject to SE tax, unless he was exempted through and approved Form 4561. You may also reduce this clerical income by any unreimbursed professional expenses, irrespective of any IRC 265 limitation. Of course, any Sch C net profit would also be subject to SE tax. I hope this helps.

While I do not know all the answers, I do specialize in clergy taxes, and I would be happy to help with any questions in any way I can. You may contact me at [email protected]. You should be advised, if you do contact me directly, you will lose the benefit of peer review that this message board makes availaible.

Mike

If I am reading correctly, it seems that KC's and Mike's answers are in conflict with each other ??

[Dave T]

If I am reading correctly, it seems that KC's and Mike's answers are in conflict with each other ??

I believe Mike is correct on this.

Unless he has opted out of Social Security, his housing allowance is subject to SE tax.

Richard Hammar publishes a tax guide speciically for pastors and churches and it is a great reaource on this subject.

Dave T

[Gail in Virginia]

I also would have to agree with Mike on this one. I think KC may have skimmed through the message too quickly - she ordinarily doesn't miss a trick!

[kcjenkins]

Yup, I am totally wrong, and Mike is correct!!!!!! Hey, that is what happens when they steal an hour from me. I'm not a lark at the best of times, and right now, I feel like shooting a Congressman or two for making the time change before 4/15. Oh, well, I'm beginning to wake up, now. Sorry for misleading you Ken.

[HV Ken]

Thanks everyone! Appreciate the help!