Clergy EST tax

[Possi]

I have a husband and wife who were just ordained a few weeks ago. I've been doing their taxes for several years. Now they have clergy income and I have not done that in a long time.

I'm reading up on it, so I will be prepared, but... I have a question...

Since they have no withholding, and will pay SE tax on their income, what percentage would you say they should pay in estimated taxes? 25%?

They just drew their first checks, so the first payment won't be due until Oct. I need to tell them how much to put away for taxes.

Thanks again,
~possi

[thomtax]

You don't say whether they are getting a housing allowance that has been authorized by the church or not. Remember that they have to pay SE tax on that also. Plus they will have income tax on any unspent housing allowance.

Soo - after considering all the options, then you would do the calculations. Without knowing how much they make and how much they made at the other work up until now, it could be in the 25-30% range. Rough out the figures for a quarter, multiply by 4 and then see what category they will fall into.

Don't forget to take into account whatever your state rules are.

LT

[erchess]

Parsonage

If they live in a parsonage now its Fair Rental Value is reportable for SE Tax purposes as well.

Then, too, you didn't say what their goal is. Many of my clients don't care how much they owe but are quite prepared to fire me if my advice results in a dollar of estimated tax penalty. Others tell me to keep their debt under a certain amount or even to see that they get a refund of at least a certain size. My point is that without knowing what bottom line they want on the return no one could possibly advise you on withholding or estimated tax payments.

[Black Bart]

Sounds about right.

...Since they have no withholding, and will pay SE tax on their income, what percentage would you say they should pay in estimated taxes? 25%?

Taking into account they owe SE on the first dollar, but income tax only after their standard deductions come off, I find that Thom's 25-30% roughly works out. If they're making lots of money (not likely) then go on up as much as they can stand (35-40). As you know, nobody is much upset to hear they've overpaid/have a refund but telling them you undershot the liability/they owe is bad for the nerves (yours).....

After year one you can project with actual figures.

[Possi]

thanks

I feel like I might have been RIGHT for once... estimating the percentage...

I'm leaving for vacation in 4 hours and have not packed. Still have one return to jet outta here, too.

Y'all have a nice 3 weeks! I'll tip one up for you!

~possi