Turbo Tax...

[Wesley Smith]

Last year I successfully used Turbo Tax. This year things are a bit more complicated. The thing that motivated me to purchase Turbo Tax is that my tax guy had me gather all the information and write it into some forms he provided. A light came on...with just a little more work I could save the 300 smackaroos he was charging.

Anyway, I've hit on something maybe one of you could answer. What amounts are reported for Self Employment tax? My assumption is salary and housing. However, the total that appears on Schedule SE is larger than those two amounts in my case. For the life of me I cannot figure how Turbo can arrive at a larger sum. Thoughts?

Time to hit the sack. Good Friday service tomorrow evening. Day of silence on Saturday. Sunrise service on Sunday. Breakfast served to everyone at the church from 8 to 10. Two services...9 & 10:30. No Sun. PM service.

Trust you all have an outstanding weekend. We have been praying that this will be a banner Easter for Christianity in general and Nazarenes in particular!

Friend,

Wes

[Jon Twitchell]

Let's see if I can get this right without a prep book in front of me... (Note, I am NOT a tax advisor--just a pastor who's done his own taxes since the beginning of time).

My Self Employment (SS) tax is based upon Cash Salary, FICA Reimbursement, housing allowance, and fair rental value of the parsonage.

My income tax is based upon Cash Salary, FICA Reimbursement, and unused housing allowance.

Items that are non-taxable by either tax include: TSA contribution, ministry expenses covered through an accountable reimbursement plan, Medical Reimbursement (again, covered through an accountable reimbursement plan).

I think I got it right...

I file a separate SE for other pastoral duties (funerals, weddings, concerts, supply preaching), but I think some people write those into the same SE as their main pastoral compensation. I don't know if one is more right than the other, or if it's just a matter of preference.

Have fun finishing your taxes on Sunday/Monday! Due date is the 17th this year... :)

[G R 'Scott' Cundiff]

Real good Jon -- looks like you know your tax stuff! Keith Drury just did a page on minister's taxes: http://www.drurywriting.com/keith/ -- very helpful.

[Barbara Moulton]

Real good Jon -- looks like you know your tax stuff! Keith Drury just did a page on minister's taxes: http://www.drurywriting.com/keith/ -- very helpful.

Just out of curiosity, I looked at that page, just to see what kind of Tax issues ministers in the US face. One thing that surprised me was that ministers are considered to be "self employed"?

In Canada, every church is considered to be the employer.

[Wesley Smith]

Jon, that is my understanding also. For some reason, Turbo Tax has my SE income listed about 9K more than the sum total of those. Going to call them today to see if they can give their rationale. Thanks, again. Wes

[Jon Twitchell]

One thing that surprised me was that ministers are considered to be "self employed"?

Yup! It is the blessing and the bane of every licensed or ordained minister in the US.

:) (well, perhaps that's a bit of an exaggeration).

What makes it really bizarre is that in my state (maybe this is national, I don't know), the churches are required to pay "Worker's Comp" insurance for their "self-employed" minister.

Churches are also supposed to give their "self-employed" minister a W2 form, and file appropriate paperwork with the IRS.

Generally, this classification is beneficial to the minister, as long as s/he understands it and takes full advantage of it. I have virtually no "Income Tax," because my taxable income is so small. However, my SECA (Social Security or FICA) tax is enormous, because it is based not only on my cash salary but also on the fair-rental value of the church-owned parsonage in which I live.

My church reimburses all of my SECA tax (based on clergy income) each year, so that is good. (Most churches in the US should be doing this--at minimum they should reimburse half of the SECA tax.)

My 2005 tax liability was around $1300 for Income Tax, and $6800 for SECA.
Almost none of the Income Tax is based on clergy income, and around $5100 of the SECA is based on clergy income. The rest is based on my wife's self-employment as a piano teacher.

I always get a little stressed around tax time, and usually leave it until the last couple of days. This year my lovely wife organized everything for me and sat me down a week out and had me plug in all the numbers so we could be done with it! :)

[Wesley Smith]

Jon, Is it possible that my wife's outside income appears on Schedule SE? It would seem to me that since she is not self employed and taxes were deducted from her salary that her income would not appear in my se calculations? Wes

[Jon Twitchell]

It certainly shouldn't...as long as you entered her as a separate W2, and didn't check the box about clergy/religious employment.

One way to check would be to delete her W2 and see if that changes the problematic line...

[Wesley Smith]

Will give that a try later this evening. Thanks, again. Will post results! Wes

[Jon Twitchell]

Another thing to check... (If you've already tried this, just disregard!)

Go to the menu item "forms" and choose "Open a form..."

A dialog box opens, and you can choose from all of the forms. Scroll down until you see "Schedule SE Adjustments Worksheet." From there, you should be able to see how they calculated your SE earnings.

Click on any number in the form, and a magnifying glass appears. If you click on the magnifying glass, it will take you to the form that it got the number from. By following the magnifying glasses, you can track the problem back to the source.

[Wesley Smith]

tomorrow, I will have the time to do that. That will either give me peace or help me know what to change! My income is a bit up from last year, but my SE has risen over $2K. Doesn't seem right. Thank you for your help. Truly.

Wes

[Kim Hersey]

I'm late getting into this thread...
but I used Turbo Tax last year and this year as well... and it took me a while to figure out that you have to enter your housing allowance TWICE on the page that asks for it... right after you select the radio button that says which way you're paying the taxes on the housing allowance. If you don't enter it the second time (in both boxes) it doesn't subtract it out of your income.

If it helps, great. If it doesn't help, pretend I didn't post this :)

Kim

[Jon Twitchell]

You know Kim...that caught me too...I don't know why I didn't think of it earlier...on that page, it asks for your housing allowance, and then your "Qualified expenses." If you included "fair rental value" in the top line (which you probably should), then it should also be included in the bottom line.

But that should affect the amount of income on the 1040, not the amount of income on Schedule SE, shouldn't it?

Hmmm....

[Ann Smith]

Quite a few years ago one of the Elders on the NWIL district left the pastorite to do financial work for churches and pastors. He has been doing our taxes ever since. The first year I met with him and went over the way I had been putting things together to have our taxes filed. He made a few suggestions and it worked out quite well. Every year he sends out a letter with a form to use as a guide in preparing. I e-mail him my records, mail him my W-2's along with my check for the preparation. Since he specializes in ministers' taxes he knows how to figure things to best help the minister. I had our materials back in less than a week and they are in the mail. Cost $95. This year I had started a business in my home so I needed some help in getting things together. I called him and he told me what I needed to get together. I don't think we could do better.
Ann

[Wesley Smith]

Somehow the housing allowance was greatly exaggerated. Don't know how that total was arrived at. When I corrected that figure, I went from owing an extra $1371 to an overpayment of $421.

Hm. Let's see, do you all charge for your advice on NazNet? Ha!

Friend,

Wes

[Jon Twitchell]

Glad you got it figured out! No charge for any help provided on NazNet, because I'm not prepared to guarantee its accuracy! :)

For anyone else interested or trying to figure it out...

Just remember that if you live in a church-owned parsonage, you also have to include the "Fair Rental Value" of that housing in addition to any "Parsonage Housing Allowance" you may receive for furnishings and maintenance.

Example: I live in a Church-owned parsonage. The church board has set the "Fair Rental value" of the Parsonage at $12,000/yr. In addition, I am given a "parsonage allowance" of $150/mo ($1800/yr) for furnishing and cleaning the parsonage. My total SS-taxable Housing Allowance is 13,800, and I have to be able to document that I spent $1800 on qualified expenses. Any portion of that $1800 that I can't document becomes "unused housing allowance" and is also subject to income tax. The "Fair Rental Value" of the parsonage is not subject to income tax, just SS.

Blessings on all who are in the midst of rendering unto Caesar!