Minister Tax Return

[peggysioux]

Taxpayer is a pastor and also received a 1099 for some non-pastorial work. The pastor had filed form 4361 in past so pastor earning are exempt from SE tax. Pastor had 2106 business expenses and my tax software is applying the 2106 expenses against pastor's non-pastorial income. Is my software correct? I would not think that the pastorial expenses could be applied to non-pastorial income. Any help would be appreciated. I have the Worth's Income Tax Guide for Ministers, but I do not see that there is any guidance on my question.

[Bonnie]

Sounds like a software issue or you have entered the business expenses in wrong place. If he received a 1099, the expenses would go in that section on the Sch C. The 2106 comes in under employee business espenses on the Sch A. My program could not mix them up as they have to be entered in separate areas of the tax program.

[peggysioux]

Minister

Sounds like a software issue or you have entered the business expenses in wrong place. If he received a 1099, the expenses would go in that section on the Sch C. The 2106 comes in under employee business espenses on the Sch A. My program could not mix them up as they have to be entered in separate areas of the tax program.

I have W-2 entered for Pastor and 2106 applied to the W-2, but pastor also received a 1099 for a small amount that is not related to clergy at all. My software is applying the pastor's business expenses from the 2106 to SE income of non-pastorial income. So, it is definitely a software issue, correct?

[Bonnie]

I would say so, have you called your software support? What are you using?

[peggysioux]

Minister

The tax return is for 2011 and I am using TRX. I switched to Drake for this filing season being TRX is such a mess.

[Larmil]

The tax return is for 2011 and I am using TRX. I switched to Drake for this filing season being TRX is such a mess.

We switched to Drake this year and they gave us copies of their prior year software. You might give Drake a call.

[PIGLEE]

Drake is the best program I have found for Ministers Return. You should be able to download 2011, from the internet. Call them and they will walk you through it step by step. The first few times I did a ministers return I took notes, (actually did some print screens), so I would remember the next time.

[peggysioux]

Minister Return

I was on the phone with TRX for an hour and a half and they still could not correct or give me a work-around so that I could finalize return. I should have just downloaded the 2011 Drake software from the beginning - you are correct, Drake Software makes it so much easier to handle a clergy return.

[Bonnie]

Tax Slayer works well too. It took me awhile years ago to figure out what was happening, but think I got it now. And they have improved their program too since first time I dealt with ministers return. But this issue if I understand it is not about a ministers return as much as where business expenses are going in the return. Sounds like what should go on Sch C is going to 2106 on Sch A. In Tax Slayer I'd say that's almost impossible.

[Lion]

If a minister worked for a church/W-2 and also performed weddings or whatever for honoraria/Sch C, then his expenses would be prorated between his Form 2106 and his Sch C. Your minister has a Sch C business for NONpastoral work, so his employment and IC work are each separate with their own designated expenses. Maybe your software has a checkbox or a Yes/No asking it to prorate, or proration may be the default for ministers and you need to find the setting to turn it off.

[MAMalody]

While I have never seen this, the IRS worksheet #4 does support allowing the 2016 expenses to be used against non-clergy Schedule C income. I decided to call a friend of mine, a tax attorney. He indicated he had never seen this also. Called me back a couple of hours later and said that the worksheet was correct that you could use the 2106 expenses against the SE base computation per the IRS worksheet. I never did get a good explanation out of him. He essentially said that he could not find anything that would prevent it or specifically said you could not do that. I used my software, ATX, and it does agree with the op experience, the worksheet does allow the expenses.

[peggysioux]

Minister Return

While I have never seen this, the IRS worksheet #4 does support allowing the 2016 expenses to be used against non-clergy Schedule C income. I decided to call a friend of mine, a tax attorney. He indicated he had never seen this also. Called me back a couple of hours later and said that the worksheet was correct that you could use the 2106 expenses against the SE base computation per the IRS worksheet. I never did get a good explanation out of him. He essentially said that he could not find anything that would prevent it or specifically said you could not do that. I used my software, ATX, and it does agree with the op experience, the worksheet does allow the expenses.

Thank you for your research on this issue; very much appreciated. The 2011 TRX program handled as you noted above, applied the 2106 clergy expenses against the SE base for non-clergy income, and the Drake software did not. I appreciate your contacting a tax attorney to get his take on it. I wish there was a reference I could use if audited. This situation seems to be uncommon and different opinions on how calculation should be handled.