- quote -

Full amount.

For example, one who does not itemize such deductions esp
because of the higher standard deduction, makes a side
calculation to arrive at proper amount SE taxable.

Cheer$$$$,
Harlan Lunsford, EA n LA

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- quote -

The SE income is reduced by the TOTAL unreimbursed employee
business expense - there is no 2% reduction.

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- quote -

Which deductions? The ones on Form 2106, or the (2% of AGI)
Sch. A ones?

I'm wondering if her income for SE tax purposes should be
reduced by the full amount of her unreimbursed business
expenses, or if she is only able to reduce her SE income by
the amount that exceeds 2% of her AGI?

~wch

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Bill wrote:
- quote -

Use any "form" you wish, yellow legal pad, green accounting
paper, white plain paper; even back of an envelope (like
Lincoln! lol).

It's a side calculation, or worksheet you retain for your
files.

Cheer$$$,
Harlan Lunsford, EA n LA

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- quote -

The unreimbursed business expenses are reported as
deductions on Form 2106, which then goes to schedule A,
miscellaneous itemized deductions. The total wages plus
housing allowance reported on schedule SE is reduced by
those deductions, leaving a lesser amount subject to SE tax.
A schedule should be attached indicating how this number
was arrived at.

As to "flowing" to schedule SE, if you are using tax
software there is usually a place for 'other non-farm
income' to be entered. The business expenses are entered as
a negative number.

Mary Ann Thomas, EA in AZ

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"MAT1040X" <mat1040x[at]aol.com> wrote:

- quote -

Ahhh....and here is where my question comes in.

My mother receives one of these W-2s as she is a missionary.
How does one report the unreimbursed employee business
expenses to arrive at the SE tax number? She has W-2 wages
(w/o any withholding) and a housing allowance, and then a
ton of unreimbursed business expenses. I had planned on
going with Sch. A, but then how does that flow to the SE tax
form?

~wch

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Harlan Lunsford <lunstax[at]bellsouth.net> wrote:
- quote -

Some ministers do recieve 1099s. What's the problem?

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- quote -

Churches are not required to file for 501(c)(3) status - but
many do just to be ablsolutlely certain of their status.
churchlawtoday.com also has many answers to church related
questions.

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- quote -

Harlan - Sorry you have had such bad experiences with
clergy. I do many minister tax returns and my experience is
that they all bend over backward to report their taxes
correctly. Often they do not want to even take deductions
that they are legally eligible for. Not a liar or cheat
among them. In fact, they are among the most honest and
forthright people I deal with.

Mary Ann Thomas, EA in AZ

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- quote -

And what about churches, mary Ann?

I've a tax client, who is also an 1120s client and a new LLC
client, who asked just the other day about 503(c) status.
Seems that certain member of his (previous) church have
split and are forming their own church, and they consulted a
lawyer who said asked an accountant about getting 503(c)
status.

I told him as far as I know, churches don't need no 503c
status, i.e. they stand on their own.

How about it? anybody?

Cheer$$,
Harlan Lunsford, EA n LA

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D. Stussy wrote:

- quote -

An acquaintance was in yesterday because I had volunteered
to give her self prepared return a once over or as some call
it, a "look-see".

So she was telling me how she ws the bookkeeper for her
church (hence the schedule CEZ) and we talked about
preachers. She told how he used to give the old preacher a
W2 and this new preacher absolutely did NOT want a W2, but
a 1099-misc instead.

Also during the conversation she reinforced my conception
about how preachers lie about finances, and especially
taxes. And we weren't even talking about Methodists
ministers, either! lol

Cheer$$,
Harlan Lunsford, EA n LA

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D. Stussy wrote:
- quote -

I've only seen a couple done this way, the correct way.
After all, publication says a minister is a common law
employee of the church, and as such, gets a W2 form. And
if the church consents, they may withhold income taxes for
federal and state.

Cheer$$,
Harlan Lunsford, EA n LA

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- quote -

If you go to churchlawtoday.com, you will be able to access
a great deal of information on ministers.

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- quote -

Then take it up with the people who wrote IRS Publication
517, because that's what they say to do.

Take a look at the bottom sample W-2 on page 14 of the
2003 edition of Pub 517.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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D. Stussy wrote:
- quote -

I have seen a few. It is called a parsonage allowance.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247
EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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Rich Carreiro wrote:
- quote -

I've never seen a W-2 like that [not even when I worked at
the IRS ]- except for those who elected out of the SS system
completely....

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- quote -

Ministers are considered self-employed for Social Security
purposes only. They are never subject to FICA/Medicare
withholding by their church employer. Instead, they pay SE
tax through their tax return. And they pay it on their
entire compensation - wages plus housing allowance (reduced
by any unreimbursed employee business expense.)

For all other purposes, ministers are common law employees.

Mary Ann Thomas, EA in AZ

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
[snip]

- quote -

It is extremely common for a "Minister of the Word and
Sacrament" to be considered self-employed while also being
compensated in the form of salary and housing allowance.
Different denominations have different practices in this
respect, and the IRS generally honors them. In
high-cost-of-housing areas such as Southern California, the
majority of a minister's pay may even be in the form of
housing allowance. The trouble comes when actual housing
expenses don't come close to housing allowance; see the Rick
Warren case.

Taxation of those who labor for churches is a specialized
area, in which the definitions and classifications that are
customary elewhere often do not apply.

--
Chris Green

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> writes:

- quote -

Ordained ministers are considered self-employed for
employment tax purposes, even when (as is most common) they
are considered employees for income tax purposes. So it is
the norm for a minister to get a W-2 that shows zero SS
wages, zero Medicare wages, and zero SS and medicare
withholding. The minister will then use Schedule SE to
compute and report the SE taxes that are due.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Rich Carreiro wrote:

- quote -

How does one have a "self-employed" minister with a housing
allowance in the first place? Doesn't he have to be an
employee of the church offering the allowance in order to
get it and be able to exclude it from the income tax side?
:-)

I agree that IRC 107 only says "as part of his
compensation," but I don't see how a minister can be
considered ordained without a supporting church that in turn
he is considered an employee of..... Therefore, isn't the
housing allowance otherwise considered wages if it weren't
excludible....?

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