11671: Clergy Screen Help

The following help is accessible on the data entry screen CLGY Ministerial Income Allocation. To access it from that screen, click the Screen Help button at the top, while in the screen press Ctrl+Alt+?, or right-click on the screen and select Screen Help from the drop list.

CLERGY

A minister can exclude from income only the smallest of:
 (a) The amount officially designated as a housing or parsonage allowance
 (b) The amount actually spent on qualified housing expenses
 (c) The fair rental value of a home or parsonage, including utilities, furnishings, etc.

The designated housing or parsonage allowance may be broken down into mortgage/rent and utilities. If there is a separately designated allowance for utilities, then make appropriate entries in that column.

Although the smallest of the above amounts is excluded from income, it is included in the calculation of ministerial income subject to SE tax on the CLERGY worksheet, "Computation of Expense Allocable to Tax-free Ministerial Income."

Ministers who own their homes and itemize their deductions can deduct both their mortgage interest and property taxes on Schedule A even though these items are also excluded from taxable income as part of their housing allowance. You must enter these amounts directly on screen A since the program cannot determine whether the housing allowance was spent on a mortgage or on a rent expense.

For retired ministers, denominations often designate a housing allowance as compensation for past services.  Retired ministers who receive a designated housing allowance may exclude the lesser of the following three amounts from the gross amount of their pension:
 (a) The amount officially designated as a housing allowance as compensation for past services
 (b) The amount actually spent on qualified housing expenses
 (c) The fair rental value of a home (plus utilities) furnished by a church.

A minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or has performed.

An explanation should be attached to the return to account for this housing allowance.

The CLGY (clergy) screen is only for those taxpayers coded as "P" in the "Special tax treatment" box on the W2 screen. Ministers are exempt from FICA and pay SE tax unless they have an IRS-approved exemption as described below.

If the minister has self-employment income related to a religious activity, enter business code 813000 on screen C. If the minister has employee business expenses, enter them on screen 2106 and mark the "Pastor - Carry 2106 amount to CLGY screen" check box. Both of these activities flow to the CLERGY worksheet where the allowable deduction for these expenses is calculated.

Those taxpayers coded as "C" on the W2 screen are church employees whose employers are opposed for religious reasons to the payment of Social Security and Medicare taxes and have elected to exclude them from coverage under FICA.

An exemption from SE tax can be claimed on either Form 4361 or Form 4029. Form 4361 is for a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner. Form 4029 is for a member of a recognized religious sect who is conscientiously opposed to accepting benefits of any private or public insurance to include Social Security and Medicare benefits. If the taxpayer has either of these IRS-approved exemptions, select the appropriate box on the SE screen.

For either of these IRS-approved exemptions, "F4361" or "F4029" will be printed opposite self-employment tax on Schedule 2, line 4.  In addition, the following statement --

"IRS-approved Form 4361, Exemption from SE Tax"

-- will be printed at the bottom of the CLERGY worksheet for those ministers who have opted-out of Social Security coverage.