Pastor

[peggysioux]

I am doing my first return for the clergy and have few questions. This church is a very small start-up church. Taxpayer received no W-2 or 1099; just brought in some info written on a piece of paper showing:

Pastor income of $9,630

Pastor owns a home about 80 miles from church so brought up a trailer to live in on church property. He stays in trailer five nights out of week and goes home two days a week. No housing allowance was set up during year. Taxpayer has a loan on trailer and would like to deduct the interest of trailer on schedule C against pastorial income. My first instinct is to say trailer interest is not deductible; but hoping my thought process is wrong. This pastor's contributions are almost half of his income, but still will be hit with SE tax. Would it be legimiate to prorate the interest on trailer based on usage?

[ChEAr$]

I am doing my first return for the clergy and have few questions. This church is a very small start-up church. Taxpayer received no W-2 or 1099; just brought in some info written on a piece of paper showing:

Pastor income of $9,630

Pastor owns a home about 80 miles from church so brought up a trailer to live in on church property. He stays in trailer five nights out of week and goes home two days a week. No housing allowance was set up during year. Taxpayer has a loan on trailer and would like to deduct the interest of trailer on schedule C against pastorial income. My first instinct is to say trailer interest is not deductible; but hoping my thought process is wrong. This pastor's contributions are almost half of his income, but still will be hit with SE tax. Would it be legimiate to prorate the interest on trailer based on usage?

Since this a full time affair, he is a W2 employee, thus schedule c is not appropriate, so
that should be the end of it. (grin

However if it's interest on his primary residence, schedule a is appropriate.

[peggysioux]

Pastor

So how would you handle if no W-2 was completed. This pastor does everything - pastor, secretary, treasurer. Very small church - about 20 members. Can he go with a Schedule C this year and get him on the correct road for 2010? And if we can go with Schedule C for this year, would he be able to deduct the interest for the trailer.

[ChEAr$]

So how would you handle if no W-2 was completed. This pastor does everything - pastor, secretary, treasurer. Very small church - about 20 members. Can he go with a Schedule C this year and get him on the correct road for 2010? And if we can go with Schedule C for this year, would he be able to deduct the interest for the trailer.

Employee earnings are reported on line 7 of the 1040.
Just like anybody else.

And no to a one time use of schedule c, even though Jesus might say "okay", but
go and sin no more.

[Lion]

Hybrid

A pastor is a hybrid for tax purposes. Employee for W-2 and line 7. But, little else on his W-2 (if he had one!) since he pays his SE tax on Sch SE anyway.

[AZ-Tax]

My Pastor clients receives a W-2 with only ...

I am doing my first return for the clergy and have few questions. This church is a very small start-up church. Taxpayer received no W-2 or 1099; just brought in some info written on a piece of paper showing:

Pastor income of $9,630

Pastor owns a home about 80 miles from church so brought up a trailer to live in on church property. He stays in trailer five nights out of week and goes home two days a week. No housing allowance was set up during year. Taxpayer has a loan on trailer and would like to deduct the interest of trailer on schedule C against pastorial income. My first instinct is to say trailer interest is not deductible; but hoping my thought process is wrong. This pastor's contributions are almost half of his income, but still will be hit with SE tax. Would it be legimiate to prorate the interest on trailer based on usage?

Fed and State withholding. No other amts appear in any other boxes of his W-2. He pays SE tax and his exps are deducted via form 2106. Been during his taxes for several years now and so far so good.

[peggysioux]

Pastor

Do I need taxpayer to complete a W-2 before doing tax return or just add the income to line 7? I would think I need W-2 in order to e-file return.

[Lion]

Treasurer

Ask him to put on his treasurer/secretary hat and fill out the blank W-2 you hand him. One number in box 1 and the church's name, address, and TIN should take care of it for your missing information, and have him put his own info as recipient.

[RLymanC]

Pastor Income

could be clasified 100% parsonage allowance, no income, no SE. Enter all in box 14

[MAMalody]

All the info mentioned is correct. You don't have to have a W-2 to enter a figure on line 7 of the 1040 after all that is where the excess housing allowance goes with no W-2.

Here's what I would do, for whatever that is worth. I would enter the income on line 7 of the 1040 and then list any appropriate professional expenses on Form 2106. My guess is that he would have some expenses that were not reimbursed. Then when I computed the SE tax I would reduce the SE income by any unreimbursed professional expenses on the 2106.

I would not have him go back at this time for a W-2. He probably won't get it in time. (Yes, I realize that the W-2 would be the correct answer.)

I would go ahead and take the interest on his home and trailer as Schedule A entries, after all he can have two homes. Hopefully, he will be able to itemize. He cannot use the interest any other way.

I would make a note on my calendar for after 15 April and then contact him about a way to construct his income package so that he receives a better tax advantage by use of the housing allowance and a written accountable reimbursement policy.

[Bonnie]

=RLymanC;101396]could be clasified 100% parsonage allowance, no income, no SE. Enter all in box 14

This is only half correct, they still pay SE on the parsonage allowance.

[PIGLEE]

No housing allowance. Must be voted on by the church, and can not be retroactive. When they do not have a W-2, just fill out a substitute W-2, wages in box 7, -0-'s for Social Security and Medicare. There is a very good book for Clergy. "Church and Clergy Tax Guide"

Good luck.