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Welcome Newbie I am the chief stumbler here as some of my fellow members will attest. Abby I am glad you mentioned turning off the form and program updates something I used to do from the first and simply forgot this year.

eservices login is my home page when I open IE because for years, you had to use IE to access.

I think the bookkeeper should have no role in the calculation of the H&U allowance request, especially with respect to determining the FRV. The pastor should submit a H&U allowance request to the church based on his/her own calculations of actual vs FRV. After all, it's the minster (not the bookkeeper), who is ultimately responsible for what is reported on the tax return. My personal opinion & general rule is that if the minister is not pulling some portion of the H&U allowance back into taxable income, then the H&U allowance is set too low and tax savings are being left on the table. Bookkepeers often pride themselves in getting things correct to the penny, but that isn't the objective with respect to this clergy benefit. There are lots of suggested H&U allowance forms available online. One important point about the H&U allowance request - it should contain wording to the effect that it remains in effect until another request is submitted. That way, if a year slips by and everyone forgets to renew it, the old amount is still in effect.

I received this letter and laughed my butt off. God knows that I want to retire from tax preparation within the next several years, but I love my clients too much to turn them over to HRB. 2020 has been enought to make me shut down right now, but I have to stick it out.

Christian, the housing allowance is excluded from income tax only (unless the documented expenses are less than that amount). The allowance is included in the SE calculation unless the minister is retired. IRS 1402(a)(8); Treas. Reg. 1.1402(a)-11(a); Flowers v. Commissioner, T.C. Memo. 1991-542. As mentioned in my earlier response, "Actual expenses can be supplies, maintenance, telephone, cable, etc." That would be on line 4d. So 4a would be the allowance, say, $5000. Probably 4b is blank but you have to ask. 4d. would be as mentioned and could add up to a fair amount. 4e is pretty clear but know what all the utilities are. It's quite likely that 4f then could be $6000+. Sometimes the utilities alone could be as much as the allowance. And often the FRV of the home is much higher than either the HA or the expenses. As Lion said then see that the lowest amount is the HA making none of it taxable for INCOME purposes. If the amount is higher than the others, the excess must be included on line 1 with wages. Click on that link and you will see Non W-2 Wages, Salaries, Tips, etc. line 16 Clergy excess allowance. This has happened to my clergy clients just once. It's hard for me to imagine an NOL without a Sch. C and I don't think any unreimburse employee expenses could ever by offset by the housing allowance which is just that - for housing. It may be that the prior preparer was trying to save the unreimbursed expense deduction when 2106 went away.

There should not be a schedule C if the only clergy income was W-2 wages plus the housing allowance. The prior tax preparer may have schedule C as some sort of template or as a way to flow the HA to Sch SE depending on her software or even due to some actual income such as honoraria. Or, she may've been doing it wrong. Clergy taxes are a specialty that I've not tried. A different beast. I think of clergy taxes as kinda a backwards statutory employee, and I don't specialize in those either. But, you could have yourself a long-time client if you prepare her returns correctly. Get the resources cited above, especially any books by those three authors; take webinars; get the resources available from your client's national church. Find a mentor to point you in the right direction; it'll be worthwhile to pay for outside expertise if you gain a long-time client. If your mentor uses your software, that's even better, because some of your questions are how to do it in your software and not just tax law questions. A few tips on how to enter data and then a review at the end by an experience clergy tax preparer can give you a new client and a new niche. See what you can find for your client's church. Here's a brief page from the Church Pension Fund of the Episcopal Church that gives an overview plus a couple of publications, one specific to the Episcopal Church: https://www.cpg.org/active-clergy/learning/finance/taxes/clergy-taxes/

I don't use that worksheet, but it appears that it is comparing the FRV from a third party with the HA voted by the church with the actual expenses (line 4f) to arrive at the lowest of those three amounts to use as the income-tax free housing allowance for tax purposes. Line 4f is his actual housing expenses. They are to compare to the other two amounts. They are NOT deducted from anything or deducted anywhere.