Technical topics regarding tax preparation.
17-Feb-2019 5:35pm
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Hello - I haven't had a clergy client in a while.
The new client has a W2 with $20,000 in box one, nothing in social security and medicare, and $50,000 in box 14.
There is no self employment income.
Client has $40,000 in qualified housing expenses.
I researched how to handle this of course and I come up with...
Line 1 (formerly line 7) shows $60,000.
Add SE Tax for $70,000 on Schedule SE.
Is this all there is to it?
Thanks!
17-Feb-2019 7:04pm
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Presumably W-2 Box 14 of $50,000 is the Housing allowance allocated by the church. Subtract the qualified housing expenses of $40,000 leaves $10,000 to flow to former line 7 along with the $20,000 from box 1 of the W-2 so that is a total of $30,000. Not sure how you got $60,000.
SE tax is calculated on the whole $70,000, but there also might be other income received such as honoraria for performing weddings and other things. If so, the clergy may also have a Sch C.
18-Feb-2019 12:20am
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Oops, right, $30,000 formerly line 7 thanks.
No C in this case, which I guess is kind of rare.
18-Feb-2019 9:43am
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And ensure that he is indeed SE exempt....
18-Feb-2019 11:07am
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Usually you can tell from their past tax returns if they have been claiming SE tax exempt.
18-Feb-2019 4:47pm
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JR1 wrote:And ensure that he is indeed SE exempt....
He's not.
Last year it "all" went on Schedule SE.
Thanks!
18-Feb-2019 5:01pm
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So that includes the Housing. On the W2 worksheet, there should be some boxes to check to make sure you include the right things.
18-Feb-2019 5:23pm
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Also, the amount of housing allowance excluded cannot exceed the fair rental value of the residence.
18-Feb-2019 5:37pm
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Yeah, 50k sounds pretty aggressive....oh. Honolulu. Never mind.
19-Feb-2019 1:54am
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JR1 wrote:So that includes the Housing. On the W2 worksheet, there should be some boxes to check to make sure you include the right things.
Roger
DAJCPA wrote:Also, the amount of housing allowance excluded cannot exceed the fair rental value of the residence.
I saw that, thanks.
JR1 wrote:Yeah, 50k sounds pretty aggressive....oh. Honolulu. Never mind.
Yup
19-Feb-2019 9:42pm
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The prior preparer took an itemized deduction for all of the mortgage interest in addition to reducing "line 7" income by the housing costs to include the mortgage interest. Is that kosher? (see what I did there)
EDIT: I am reading elsewhere that is is OK to take both.
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