I have a minister that has elected out of Social Security. He owes no income tax because he has 3 children, a wife, and a large amount of itemized deductions.Lacerte calculates SE tax on the housing allowance. Is this correct?I cannot find answer in IRS publication.wiseo
Here you go.
You said he had elected out of SS. If that is true, why would report the housing allowance at all? It is only subject to income tax if it exceeds the actual housing expense in which case you would report the excess as taxable income.
His housing allowance is always taxable, it's only his wages that are not subject to SE if he opts out. Check out Pub 517
If the minister has a valid exemption from social security, all income paid to him as a minister (including housing) is exempt. Do not enter housing in the Lacerte program if the minister is exempt from social security.
I appreciated the attachments on ministers. Do you have anything that could help me with ministers who have their own ministries? Like a poor man's Billy Graham?
Not specifically, no, but that just means that I don't have anything - there is probably something out there. Google is a wonderful search tool, try different key words and alternate with reversing the order of the words to see different results.
Also, try analyzing the situation.
For example: There either is a church or there is not.
If there is a church, the church is exempt and the compensation paid to the minister is taxable like any other minister's would be.
If there is not a church, then I believe the minister/preacher/evangelist/missionary/whatever is self employed and files a Schedule C for the activity.
I hope this helps.
The Baptist church organizations are an excellent source of materials, but don't forget Methodists, Episcopalians, and any other organization that intends to operate legally while fulfilling their mission. There is usually a resource available for any niche once you identify what the mission is, regardless of whether it is secular or religious.
And don't be confused by terminology - "mission" is just a church industry word for "prime directive" or whatever you want to call the organizational purpose.
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Larry, are you a member of CalCPA?
Email me at the address in my profile.
If I understand Pub 517 correctly, if a minister has opted out of SS & Medicare using Form 4361, neither his Box 1 W-2 wages nor his non-taxable housing allowance are subject to SE tax. However, it still appears that any unreimbursed expenses related to his ministry that are reported on Form 2106 would have to be allocated between his taxable wages and his non-taxable housing allowance, thus reducing his deductible unreimbursed expenses deducted on Schedule A. If this is all correct, how do you get Lacerte to properly report everything. It either taxes everything for SE and allocates a portion of expenses to the non-taxable housing allowance OR it exempts it all from SE and does not allocate any of the expenses to the non-taxable housing allowance. Any ideas?
You need to do a manual calculation of the allocation, and adjust the 2106 accordingly.
