Retired minister housing allowance exemption

[Jack from Ohio]

Retired minister.

1099R

Box 1 - 38,382

Box 2 - 38,382

No boxes checked.

Dist code 7

Minister has provided a worksheet from the Pension Plan administrator verifying that the properly calculated portion of the income is designated as housing allowance. This amount is calculated correctly and is $20,394.

The notice from the Pension Plan says to simply change line 16b to reflect the exemption. I am a little hesitant to change the numbers on the 1099R, especially when box 2 is filled in, and the "Taxable amount not determined" box is NOT checked.

Any ideas how to exclude this income? Or, must we have the pension plan submit a corrected 1099R with box 2 blank an the "Taxable amount not determined" box checked?

Any ideas are certainly welcome at this point.

[JohnH]

That is unusual.

The Methodist Church (for example) enters nothing in Box 2 of the 1099-R and marks the "Taxable Amount Undetermined", because they simply pass an annual resolution declaring all income received by retired Methodist Ministers to be a housing & utilities allowance. The retired minister then does the calculations, attaches a statement to the return stating how much was excluded, and pulls the remainder back into income on Line 16b. That seems to be a reasonable way to handle the matter.

But it Box 2 is filled in, then you may have a problem. I'll bump this back up - maybe Mike Malody will jump in and suggest whether you should go for a reissued 1099-R or simply rely on an explanatory attachment.

[MAMalody]

I would try for a corrected 1099 R, but, I doubt that you will get it. Don't forget this still must meet the normal housing allowance rules. I would probably end up seeing if the full designation would be exempted and list in on line 21 (other income) as a minus figure. It should more properly be adjusted against line 16b, but, the IRS will be looking for the 1099R amount and will cause more problems that listing in on line 21. It is not subject to SE tax.

This is not a perfect fix, however, it will work. I hope this helps. You can contact me at [email protected] if necessary. You should note that if you do so you will lose the benefit of peer review that this board provides.