Even members of the clergy are required to file tax returns, even if their calling offers benefits not available to the laity. God might be watching closely, but the Internal Revenue Service (IRS) has its own level of scrutiny.
In the 2016 “Church and Nonprofit Tax & Financial Guide,” Dan Busby, Michael Martin and John Van Drunen provide tips for ministers who are filling out their tax returns. Among those tips:
* Use the 79-line (long) Form 1040 instead of the shorter forms. It accommodates every minister, and there’s no penalty for leaving some of the lines blank.
* Form 1040, Line 7. All compensation from a W-2 is reported here. Be sure the church has not included the housing allowance amount in Box 1 of Form W-2.
* Form 1040, Line 12. The only ministerial income that should be reported on Line 12 is fees from weddings, funerals, speaking engagements and similar income. Unreimbursed expenses related to this income should be deducted on Schedule C or Schedule C-EZ.
* Form 1040, Line 51. If a minister made contributions to a 403(b) or 401(k) plan, and his/her adjusted gross income was $50,000 or less, the filer might be eligible for the retirement savings contribution credit.
* Schedule A, lines 6, 10-12. These lines relate to the most significant tax break available for ministers who own their own homes. Items excluded under the housing allowance could be deductible as itemized deductions.