dexterman

I'm getting more irritated with the Turbo tax ads, in particular the business ads. They claim it's so easy anyone can do it and are offering free efile for Corps, P-ships and individual businesses. I think they de-value the service we offer making it sound like we are overcharging to do such a "simple task"!

Yes it's true, it is totally up to the bank - some banks will no longer accept the 8109's and other banks will charge to process the 8109's.

In Wisconsin spouses are not exempt from Workers Comp either.

Thanks, that releives a bit of stress.

Does an extension need to be filed in order to efile after 4/15/08? I have a few people who need to do just the stimulus return and I'm so busy right now I don't want to take the time to get info needed to file the extension. Can I just have them come in after 4/15 to complete and efile a return or will they need to mail it if they do not file an extension?

Do you need to send 8453 with all efiled clergy?

On another note ask the lawyer what LLC stands for? I'll bet they say Limited Liability Corporation - many haven't a clue what the tax consequences of the LLC are. If the client won't follow your instructions let the lawyer do the taxes.

You have a problem here. If boxes 3-6 are filled in on the W-2 the pastor does not qualify for dual status and therefore cannot have a housing allowance. While you can list the housing in box 14, I don't actually do it. It is not required, but it is okay.

For SE purposes you would add the cash salary, the lower of designated housing, actual amount spent or the fair rental value less business protion of tax preparation cost, business % of auto interest and taxes less any unreimbursed professional expenses, irrespective of the IRC 265 limitation.

If you pastor had 31K income and 1800 housing allowance, his W-2 should have 31K in box 1 and the rest should be blank. You could put 1800 in box 14 and of course you would have any appropriate state boxes filled out.

If his housing (1800) is part of the 31K I would try to have the W-2 corrected. Failing that, I would enter the qualified housing expense in line 21 of the 1040 as a negative number.

Mike,

The amounts are in box 1, 3, 5 and 16(State Wages). Box 2, 4, 6 and 17(State w/held) are Zero?

Also, I did the worksheet from the Quickfinder and deducted the business portion of his unreimbursed expenses for the SE income.

I didn't realized there is so much involved and so many errors with clergy and reporting until this year, touched on the subject slightly at past seminars, but mind wonders because I have not actually dealt w/ the issue. I thought the designated housing allowance was just some number that was grabbed out of the air, never realized how important it is.

So if a minister normally receives a salary of $34,000 they could negogiate to set the housing allowance at say $6,000. Then when the W-2 is completed box 1, 3 and 5 should have $28,000 and box 14 could have the amount of $6,000 reported for informational purposes only. Then for SE purposes I would add the lesser of (1) designated amount, (2) amount actually spent or (3) the fair rental value?

My minister has a salary of $31,000 and said the housing allowance is $1,800 plus utilities but in box 1, 3 and 5 the total $31,000 is reported. So if indeed the $1800 is the designated housing allowance this amount only should be deducted from box 1, 3, and 5(the corrected amount of $29,200)?

It was entered as a negative on line 21. I have studied past years returns and can't find a rhyme or reason to the amounts that are deducted. One year the amount equal to the housing allowance was deducted, another year the housing allowance plus utilities, and another year nothing. I do want to do the return correctly and neither over or under report the income.

Would there be a proper reason to deduct any part of the housing allowance on line 21? If so when or why? I've been trying to research but at this time of year my mind is not totally clear and I don't have a lot of extra time, most likely we'll do an extension, but he's pushing for not.

Hmmmmmmmmmm I wonder why? Can we say REBATE!

Anyone have any thoughts on this portion of my question?

I have a new minister and in previous years the CPA took a deduction for part of the housing allowance on line 21? Under what circustances would this be done? Could it be that part of the housing allowance was erroneously included in box 7 of the W-2? CPA has sinced died and new treasurer at the church and the Minister has not a clue???

Maximum Gross income is $3,400. So if all other requirements met and he did not provice more than 1/2 of his own support yes she can claim him as a dependent for 2007.

Is 100% of the housing allowance always subject to SE tax (if not exempted) or is it also the lesser of (1) designated amount, (2) amount actually spent or (3) the fair rental value? If it is not the lesser of, why would it more be advantageous for an increased $ amount, because what you save in income taxes you pay in SE tax, or am I missing something? Former CPA told (according to minister anyways) minister the less the designated allowance the better because he wouldn't have to pay SE tax on this amount.

I have a new minister and in previous years the CPA took a deduction for part of the housing allowance on line 21? Under what circustances would this be done? Could it be that part of the housing allowance was erroneously included in box 7 of the W-2? CPA has sinced died and new treasurer at the church and the Minister has not a clue???

5. If they are not exempted from Social Security, the income they have that is subject to the SE tax is: cash salary, designated (and paid) housing allowance, social security offset, honorariums, royalties, recapture of auto depreciation; less any unreimbursed professional expenses, business portion of tax prep fee, and business % of auto interest and personal property tax. The worksheet that the IRS uses and ATX uses has an error in it. It mistakenly does not allow the IRC 265 limitation as a reduction for the SE computation while the code and regs do.

7. It is a good idea when the pastor makes the request to the church that he adds about 20% to the amount that they think they will use. Since this is a use it or lose it proposition, the pastor and church lose nothing by making the figure larger that actually used. However, it cost them money, if the designated amount is not more than what they expect to use.

8. The housing amount that is not subject to income tax is the lower of (1) designated amount, (2) amount actually spent or (3) the fair rental value. So if the amount designated and fair rental value is less than what is spent, the pastor is paying income tax on income that could have been exempted. If the amount spent is less than the amount designated or the fair rental value, then the difference between the designated amount and what was spent becomes subject to income tax and is added to line 7 of Form 1040. As you can see it does not hurt to overdesignate but hurts when you underdesignate.

11. The housing amount is NOT required to be listed on the W-2, however, the pastor will always need to know what it is so their tax return can be properly prepared.

Mike

Is 100% of the housing allowance always subject to SE tax (if not exempted) or is it also the lesser of (1) designated amount, (2) amount actually spent or (3) the fair rental value? If it is not the lesser of, why would it more be advantageous for an increased $ amount, because what you save in income taxes you pay in SE tax, or am I missing something? Former CPA told (according to minister anyways) minister the less the designated allowance the better because he wouldn't have to pay SE tax on this amount.

I have a new minister and in previous years the CPA took a deduction for part of the housing allowance on line 21? Under what circustances would this be done? Could it be that part of the housing allowance was erroneously included in box 7 of the W-2? CPA has sinced died and new treasurer at the church and the Minister has not a clue???