Publication 517 (2015) SOCIAL SECURITY AND OTHER INFORMATION FOR MEMBERS OF THE CLERGY AND RELIGIOUS WORKERS

 

Medicare wages and self-employment income are combined to determine if income exceeds the threshold. A self-employment loss isn't considered for purposes of this tax. RRTA compensation is separately compared to the threshold. For more information, see Form 8959, Additional Medicare Tax, and its separate instructions.

Nonfarm Optional Method

You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low.

You may use the nonfarm optional method if you meet all the following tests.

 

1. You are self-employed on a regular basis. You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. The net earnings can be from either farm or nonfarm earnings or both.

2. You have used this method less than 5 prior years. (There is a 5-year lifetime limit.) The years don't have to be consecutive.

3. Your net nonfarm profits were:

 

a. Less than $5,284 and

b. Less than 72.189% of your gross nonfarm income.

If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method.

Table 3. Figuring Nonfarm Net Earnings

 --------------------------------------------

 

 

IF your gross

 

 nonfarm             THEN your net earnings

 

 income is . . .     are equal to . . .

 

 --------------------------------------------

 

 $7,320 or less      Two-thirds of your gross

 

                     nonfarm income.

 

 --------------------------------------------

 

 More than           $4,880

 

 $7,320

 

 --------------------------------------------

 

 

Actual net earnings.

Multiply your total earnings subject to SE tax by 92.35% (0.9235) to get actual net earnings. Actual net earnings are equivalent to net earnings under the "Regular Method."

More information. For more information on the nonfarm optional method, see Pub. 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions.

Income Tax: Income and Expenses

Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently.

Note. For purposes of this section, references to members of the clergy are only to ministers or members of a religious order.

Income Items

The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here.

Offerings and Fees

If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc., in addition to your salary. If the offering is made to the religious institution, it isn't taxable to you.

Outside Earnings

If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. For more information, see Pub. 526.

Exclusion of Rental Allowance and Fair Rental Value of a Parsonage

Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. Services include:

 

This exclusion applies only for income tax purposes. It doesn't apply for SE tax purposes, as discussed earlier under

Amounts included in gross income

under

Self-Employment Tax: Figuring Net Earnings.

Designation requirement. The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. It must designate a definite amount. It can't determine the amount of the housing allowance at a later date. If the church or organization doesn't officially designate a definite amount as a housing allowance, you must include your total salary in your income.

If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination doesn't effectively designate a housing allowance for you. The local congregation must officially designate the part of your salary that is a housing allowance. However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency.

An official designation of an amount as a housing or rental allowance may be shown in an employment contract, in the minutes of a church or qualified organization, in a budget, or any official action taken in advance of payment of the allowance. A designation is sufficient if it permits a payment to be identified as a payment of a rental or housing allowance as distinguished from salary or other remuneration.

Informal discussions don't amount to an official designation. However, the facts and circumstances of a designation may demonstrate that the designation was official.

Rental allowances. If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if:

 

The amount you exclude can't be more than the fair rental value of the home, including furnishings, plus the cost of utilities.

Fair rental value of parsonage. You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. However, the exclusion can't be more than the reasonable pay for your services. If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost.

Example. Rev. Joanna Baker is a full-time minister. The church allows her to use a parsonage that has an annual fair rental value of $24,000. The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. Her actual utility costs during the year were $7,000.

For income tax purposes, Rev. Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage).

Home ownership. If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of:

 

Excess rental allowance.

You must include in gross income the amount of any rental allowance that is more than the smallest of:

 

Include this amount in the total on Form 1040, line 7. On the dotted line next to line 7, enter "Excess allowance" and the amount.

TIP: You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040).

Retired ministers. If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. However, a minister's surviving spouse can't exclude the rental value unless the rental value is for ministerial services he or she performs or performed.

Teachers or administrators. If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you can't exclude from your income a housing allowance or the value of a home that the college provides to you.

TIP: If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. In Pub. 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits.

If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but aren't authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion doesn't apply to you.

Theological students. If you are a theological student serving a required internship as a part-time or assistant pastor, you can't exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister.

Traveling evangelists. You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements.

 

Cantors.

If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income.

Earnings--Members of Religious Orders

Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who:

 

See

Members of Religious Orders,

earlier, under

Social Security Coverage.

Foreign Earned Income

Certain income may be exempt from income tax if you work in a foreign country or in a specified U.S. possession. Pub. 54 discusses the foreign earned income exclusion. Pub. 570, Tax Guide for Individuals With Income From U.S. Possessions, covers the rules for taxpayers with income from U.S. possessions. You can get these free publications from the Internal Revenue Service at IRS.gov or from most U.S. embassies or consulates.

Expense Items

The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here.

Ministerial Trade or Business Expenses as an Employee

When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses).

You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. See Pub. 529 for more information on this limit.

However, you can't deduct any of your employee business expenses that are allocable to tax-free income (discussed next).

Expenses Allocable to Tax-Free Income

If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. You can't deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance.

Exception. This rule doesn't apply to your deductions for home mortgage interest or real estate taxes on your home.

Figuring the allocation. Figure the portion of your otherwise deductible expenses that you can't deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:

                          Tax-free rental or

 

                         parsonage allowance

 

                        ---------------------

 

                         All income (taxable

 

                         and tax free) earned

 

                          from your ministry

 

 

When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person.

TIP: Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax.

Example. Rev. Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person.

Rev. Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows:

($10,000 ÷ $40,000) × $3,500 = $875

Rev. Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows:

($10,000 ÷ $40,000) × $500 = $125

Required statement. If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. The statement must contain all of the following information.

 

See the attachments prepared for the

Comprehensive Example,

later. Following the example, you will find blank worksheets for your own use.

Health Insurance Costs of Self-Employed Ministers

If you are self-employed, you may be able to deduct the amount you paid in 2015 for medical and dental insurance and qualified long-term care insurance for you, your spouse, your dependents, and any child you may have who, as of the end of the tax year, had not attained age 27.

For purposes of this deduction, your child must be an individual who is your son, daughter, stepson, stepdaughter, or eligible foster child. An individual who has been legally adopted by you (or placed with you for adoption) will be treated as your child.

If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. See the Instructions for Form 1040 to figure your deduction.

The following special rules apply to the self-employed health insurance deduction.

 

More information.

For more information about the self-employed health insurance deduction, see chapter 6 in

Pub. 535

.

Deduction for SE Tax

You can deduct one-half of your SE tax in figuring adjusted gross income. This is an income tax deduction only, on Form 1040, line 27.

CAUTION: Don't claim this deduction in figuring net earnings from self-employment subject to SE tax.

Income Tax Withholding and Estimated Tax

The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her wages or salary. However, your salary isn't subject to federal income tax withholding if both of the following conditions apply.

 

If your salary isn't subject to withholding, or if you don't pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income.

You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return.

Determine your estimated tax by using the worksheets in Pub. 505, Tax Withholding and Estimated Tax. Pay the entire estimated tax for 2016 or the first installment by April 18, 2016. See Form 1040-ES for the different payment methods. The April 18 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. For more information, see chapter 2 of Pub. 505.

If you perform your services as a common-law employee of the church and your salary isn't subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due.

Filing Your Return

You must file an income tax return for 2015 if your gross income was at least the amount shown in the third column of Table 4.

Table 4. 2015 Filing Requirements for Most Taxpayers

 ----------------------------------------------------------------------

 

                                                       

THEN file a

 

                                                        return if your

 

                                                        gross income**

 

 IF your filing status      AND at the end of 2015      was at least

 

 is . . .                   you were* . . .             . . .

 

 ----------------------------------------------------------------------

 

 single                     under age 65                   $10,300

 

                            65 or older                    $11,850

 

 ----------------------------------------------------------------------

 

 married filing jointly***  under 65 (both spouses)        $20,600

 

                            65 or older (one spouse)       $21,850

 

                            65 or older (both spouses)     $23,100

 

 ----------------------------------------------------------------------

 

 married filing separately  any age                         $4,000

 

 ----------------------------------------------------------------------

 

 head of household          under 65                       $13,250

 

                            65 or older                    $14,800

 

 ----------------------------------------------------------------------

 

 qualifying widow(er) with  under 65                       $16,600

 

 dependent child            65 or older                    $17,850

 

 ----------------------------------------------------------------------

 

 * If you were born on January 1, 1951, you are considered to be age 65

 

 at the end of 2015. (If your spouse died in 2015 or you are preparing

 

 a return for someone who died in 2015, see

Pub. 501

, Exemptions,

 

 Standard Deduction, and Filing Information.)

 

 **

Gross income

 means all income you received in the form of money,

 

 goods, property, and services that isn't exempt from tax, including

 

 any income from sources outside the United States or from the sale of

 

 your main home (even if you can exclude part or all of it).

Do not

 

 include any social security benefits unless (a) you are married filing

 

 a separate return and you lived with your spouse at any time in 2015,

 

 or (b) one-half of your social security benefits plus your other gross

 

 income and any tax-exempt interest is more than $25,000 ($32,000 if

 

 married filing jointly). If (a) or (b) applies, see the instructions

 

 for Form 1040, lines 20a and 20b, to figure the taxable part of social

 

 security benefits you must include in gross income. Gross income

 

 includes gains, but not losses, reported on Form 8949 or

 

 Schedule D (Form 1040). Gross income from a business means,

 

 for example, the amount on Schedule C (Form 1040), line 7, or

 

 Schedule F (Form 1040), line 9. But, in figuring gross income, don't

 

 reduce your income by any losses, including any loss on

 

 Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9.

 

 *** If you didn't live with your spouse at the end of 2015 (or on the

 

 date your spouse died) and your gross income was at least $4,000, you

 

 must file a return regardless of your age.

 

 ======================================================================

 

 

Additional requirements.

Even if your income was less than the amount shown in Table 4, you must file an income tax return on Schedule SE (Form 1040), if:

 

Self-employment tax.

If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return.

If you filed Form 4361 and didn't receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. You should report ministerial earnings and expenses from nonemployee ministerial services on C-EZ (Form 1040). You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, don't report those wages on Schedule C or C-EZ (Form 1040). Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation.

Note. For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. You can't deduct these expenses on C-EZ (Form 1040) as a trade or business expense.

Exemption from SE tax. If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you don't have any other income subject to SE tax, don't file Schedule SE (Form 1040). Instead, enter "Exempt--Form 4361" on the dotted line next to Form 1040, line 57. However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B.

If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you don't have any other income subject to SE tax, don't file Schedule SE (Form 1040). Instead, enter "Form 4029" on the dotted line next to Form 1040, line 57.

More information. For more information on filing your return, including when and where to file it, see the Instructions for Form 1040.

Retirement Savings Arrangements

Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. You generally can deduct your contributions to the plan. Your contributions and the earnings on them aren't taxed until they are distributed.

Retirement plans for the self-employed. To set up one of the following plans you must be self-employed.

 

The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. See

Employment status for other tax purposes

under

Coverage of Members of the Clergy,

earlier. This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax.

For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. You aren't a self-employed person for purposes of setting up a retirement plan. This result is true even if your salary is subject to SE tax.

On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on C-EZ (Form 1040), are earnings from self-employment for all tax purposes.

For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Pub. 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).

Individual retirement arrangements (IRAs). The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. Generally, your maximum contribution for 2015 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older by the end of 2015).

However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. You can't deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed.

If you contribute to a traditional IRA, your contribution may be deductible. However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan).

For more information on IRAs, see Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs).

Tax-sheltered annuity plans. Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. For more information, see Pub. 571, Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations.

Deducting contributions to tax-sheltered annuity plans. If you are an employee, your employer may exclude allowable contributions to a 403(b) plan from your income. These contributions won't be included in your total wages on your Form W-2, but you will pay tax on distributions from your plan. However, if you choose to have contributions made to a Roth contribution program, they won't be excluded from your income, but will be distributed tax free.

You may also participate in a 403(b) plan if you are a minister or chaplain and, in the exercise of your ministry, you are either self-employed or employed by an organization that isn't exempt from tax under section 501(c)(3) of the Internal Revenue Code. If either situation applies to you, you can deduct your contributions to a 403(b) plan as explained next.

 

Retirement savings contributions credit.

You may be able to take a tax credit of up to $1,000 (up to $2,000 if filing jointly) for certain contributions you make to any of the retirement plans or IRAs discussed earlier. The credit is based on the contributions you make and your credit rate. Your credit rate can be as low as 10% or as high as 50%, depending on your adjusted gross income. Figure the credit on Form 8880, Credit for Qualified Retirement Savings Contributions.

You can't take the credit if any of the following apply.

Full-time student.

You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full time.

Adjusted gross income. When figuring adjusted gross income, you must add back any exclusion or deduction claimed for the year for:

 

More information.

For more information about the credit, see

Pub. 590-A

.

Health Care: Individual Responsibility

Shared responsibility payment. If for any month in 2015, you, your spouse (if filing jointly), or your dependents didn't have qualifying health care coverage (called minimum essential coverage) and didn't qualify for a coverage exemption, then you must make a shared responsibility payment. See the instructions for line 61 in the Form 1040 instructions and Form 8965 for more information.

Minimum essential coverage. Most health care coverage that people have is minimum essential coverage. Minimum essential coverage includes:

 

See the instructions for Form 8965 for more information on what qualifies as minimum essential coverage.

Premium tax credit. If you, your spouse, or a dependent enrolled in health insurance through the Marketplace, you may be able to claim the premium tax credit. See the instructions for Form 1040, line 69, and Form 8962.

Earned Income Credit

The earned income credit is a credit for certain people who work. If you qualify for it, the earned income credit reduces the tax you owe. Even if you don't owe tax, you can get a refund of the credit.

You can't take the credit for 2015 if your earned income (or adjusted gross income) is:

 

Earned income.

Earned income includes your:

To figure your earned income credit, see the Form 1040 instructions for lines 66a and 66b.

CAUTION: If you are a minister and have an approved Form 4361, your earned income will still include wages and salaries earned as an employee, but it will not include amounts you received for nonemployee ministerial duties, such as fees for performing marriages and baptisms, and honoraria for delivering speeches.

More information. For detailed rules on this credit, see Pub. 596. To figure the amount of your credit, you can either fill out a worksheet or have the IRS compute the credit for you. You may need to complete Schedule EIC and attach it to your tax return.

Comprehensive Example

Rev. John White is the minister of the First United Church. He is married and has one child, Jennifer. Jennifer is considered a qualifying child for the child tax credit. Mrs. Susan White isn't employed outside the home. Rev. White is a common-law employee of the church, and he hasn't applied for an exemption from SE tax.

The church paid Rev. White a salary of $31,000. In addition, as a self-employed person, he earned $4,000 during the year for weddings, baptisms, and honoraria. He made estimated tax payments during the year totaling $7,000. The local community college paid him $3,400 for teaching a course. The Whites paid $925 in general state and local sales taxes during 2015.

Rev. and Mrs. White own a home next to the church. They make a $650 per month mortgage payment of principal and interest only. They paid $1,800 in real estate taxes for the year on the home. The church paid Rev. White $800 per month as his parsonage allowance (excluding utilities). The home's fair rental value for the year (excluding utilities) is $9,840. The utility bills for the year totaled $960. The church paid him $100 per month ($1,200 for the year) designated as an allowance for utility costs.

First, the parts of Rev. and Mrs. White's income tax return are explained in the order the Whites complete them. Next, the parts are illustrated in the order that Rev. White will assemble the return to send it to the IRS.

Form W-2 From Church

The church completed its Form W-2 for Rev. White as follows.

Box 1. The church entered Rev. White's $31,000 salary.

Box 2. The church left this box blank because Rev. White didn't request federal income tax withholding.

Boxes 3 through 6. Rev. White is considered a self-employed person for purposes of social security and Medicare tax withholding, so the church left these boxes blank.

Box 14. The church entered Rev. White's total parsonage and utilities allowance for the year and identified them.

Form W-2 From College

The community college gave Rev. White a Form W-2 that showed the following.

Box 1. The college entered Rev. White's $3,400 salary.

Box 2. The college withheld $272 in federal income tax on Rev. White's behalf.

Boxes 3 and 5. As an employee of the college, Rev. White is subject to social security and Medicare withholding on his full $3,400 salary from the college.

Box 4. The college withheld $210.80 in social security taxes.

Box 6. The college withheld $49.30 in Medicare taxes.

Schedule C-EZ (Form 1040)

Some of Rev. White's entries on Schedule C-EZ are explained here.

Line 1. Rev. White reports the $4,000 from weddings, baptisms, and honoraria.

Line 2. Rev. White reports his expenses related to the line 1 amount. He paid $87 for marriage and family booklets and drove his car 490 miles for business, mainly in connection with honoraria. Rev. White used the standard mileage rate to figure his car expense, as follows.

490 miles × 57.5 cents ($0.575) = $282

These expenses total $369 ($282 + $87). However, he can't deduct the part of his expenses allocable to his tax-free parsonage allowance.

First, Rev. White uses Worksheet 1 to figure his percentage of tax-free income. Then he completes Worksheet 2 (see Attachment 1 (continued), later) to show that 23% or $85 ($369 × 23% (0.23)) of his business expenses aren't deductible because they are allocable to his tax-free allowance. He subtracts the $85 from the $369, enters the $284 difference on line 2, and adds a note at the bottom of the schedule to see the attached statement.

Rev. White attaches Worksheets 1 and 2 to his return. This is part of his required statement. See Attachment 1, later.

Line 3. Rev. White enters his net profit of $3,716 ($4,000 - $284) on line 3 and on Form 1040, line 12.

Lines 4 through 8b. Rev. White fills out these lines to report information about his car.

Form 2106-EZ

Rev. White fills out Form 2106-EZ to report the unreimbursed business expenses he had as a common-law employee of First United Church.

Line 1. Before completing line 1, Rev. White fills out Part II because he used his car for church business. His records show that he drove 2,774 business miles, which he reports in Part II. Then, he figures his car expense for his line 1 entry.

2,774 miles × 57.5 cents ($0.575) = $1,595

Line 4. He enters $231 for his professional publications and booklets.

Line 6. Before entering the total expenses on line 6, Rev. White must reduce them by the amount allocable to his tax-free parsonage allowance. After completing Worksheet 3 (see Attachment 1, later), he finds that $420 (($1,595 + $231) × 23% (0.23)) of his employee business expenses aren't deductible. He subtracts $420 from $1,826 ($1,595 + $231) and enters the result, $1,406, on line 6, adding a note at the bottom of the page about the attached statement. He also enters $1,406 on Schedule A (Form 1040), line 21.

Schedule A (Form 1040)

Rev. White fills out Schedule A as explained here.

Line 5. He deducts $925 for state and local general sales taxes paid during 2015. Because he has accurate records, he uses his actual expenses and doesn't need to complete the State and Local General Sales Tax Deduction Worksheet and consult the Optional State and Local Sales Tax Tables in the Schedule A (Form 1040) instructions.

Line 6. He deducts $1,800 in real estate taxes paid in 2015.

Line 10. He deducts $5,572 of home mortgage interest paid in 2015 (reported on Form 1098, Mortgage Interest Statement (not shown)).

Line 16. Rev. and Mrs. White contributed $4,800 in cash during the year to various qualifying charities. Each individual contribution was less than $250 and they have the required records for all donations.

Line 21. Rev. White enters his $1,406 of unreimbursed employee business expenses from Form 2106-EZ, line 6.

Lines 25, 26, and 27. He can deduct only the part of his employee business expenses that exceeds 2% of his adjusted gross income. After he completes page 1 of Form 1040, he fills out these lines to figure the amount he can deduct.

Line 29. The total of all the Whites' itemized deductions is $13,797, which he enters here and on Form 1040, line 40.

Schedule SE (Form 1040)

After Rev. White prepares Schedule C-EZ and Schedule SE (Form 1040). He reads the chart on page 1 of the schedule and determines that he can use Section A--Short Schedule SE to figure his self-employment tax. Rev. White is a minister, so his salary from the church isn't considered church employee income. Thus, he doesn't have to use Section B--Long Schedule SE. He fills out the following lines in Section A.

Line 2. Rev. White attaches a statement (see Attachment 2, Worksheet 4, later) that explains how he figures the amount ($43,605) to enter on line 2, and adds a note at the bottom of the page to see the attached statement.

Line 4. He multiplies $43,605 by 92.35% (0.9235) to get his net earnings from self-employment ($40,269).

Line 5. The amount on line 4 is less than $118,500, so Rev. White multiplies the amount on line 4 ($40,269) by 15.3% (0.153) to get his self-employment tax of $6,161. He enters that amount here and on Form 1040, line 57.

Line 6. Rev. White multiplies the amount on line 5 by 50% (0.50) to get his deduction for the employer-equivalent portion of self-employment tax of $3,081. He enters that amount here and on Form 1040, line 27.

Form 1040

After Rev. White prepares Form 2106-EZ and the other schedules, he fills out Form 1040. He files a joint return with his wife. First, he fills out the address area and completes the appropriate lines for his filing status and exemptions. Then, he fills out the rest of the form as follows.

Line 7. Rev. White reports $34,640. This amount is the total of his $31,000 church salary, $3,400 college salary, and $240 ($1,200 - $960), his excess utility allowance. He enters "Excess allowance $240" on the dotted line next to line 7 as directed under Excess rental allowance, earlier. His employers reported the two salaries to him in box 1 of the Forms W-2 he received.

Line 12. He reports his net profit of $3,716 from Schedule C-EZ, line 3.

Line 27. He enters $3,081, the deductible part of his SE tax from Schedule SE, line 6.

Line 40. He enters $12,872, the total itemized deductions from Schedule A, line 29.

Line 52. The Whites can take the child tax credit for their daughter, Jennifer. Rev. White figures the credit by completing the Child Tax Credit Worksheet (not shown) in the Instructions for Form 1040. He enters the $948 credit on line 52.

Line 57. He enters $6,161, the self-employment tax from Schedule SE, line 5.

Line 61 Rev. White checks the box and leaves the entry space blank because he, his wife, and daughter had qualifying health coverage for all of 2015.

Line 64. He enters $272, the federal income tax withheld, as shown in box 2 of his Form W-2 from the college.

Line 65. He enters the $7,000 estimated tax payments he made for the year.

Line 66a. Rev. White completes Steps 1 - 5 of the instructions for lines 66a and 66b to see if he can claim the earned income credit. As instructed under Clergy following Step 6, he writes "Clergy" on the dotted line next to line 66a. He then completes Worksheet B (not illustrated) in the instructions and finds that he qualifies for an earned income credit of $116. He enters $116 on line 66a and attaches Schedule EIC as directed by line 11 of Worksheet B.

Line 67. Rev. White enters $52 from Schedule 8812 (not illustrated).

Line 77. He wants to have any overpayment of tax applied to his 2016 estimated tax.

Attachment 1

Attachment 1 (Worksheets 1, 2, and 3) shows the computation of expenses that are nondeductible because they are allocable to tax-free ministerial income and the deductions allowed.

Attachment 2

Attachment 2 (Worksheet 4) shows the computation of net self-employment income.

 

Attachment 1--John E. White 011-00-2222

Worksheet 1. Figuring the Percentage of Tax-Free Income

 Note. For each line, enter the appropriate amount in all boxes that

 

 aren't shaded.

 

 ----------------------------------------------------------------------

 

                                               

(a)      (b)      (c)

 

             Source of Income                 Taxable  Tax-free  Total

 

 ----------------------------------------------------------------------

 

 

1

  W-2 salary as a minister

 

    (from box 1 of Form W-2)    

1

             

31,000            31,000

 

 ----------------------------------------------------------------------

 

 

2

  Gross income from weddings,

 

    baptisms, writing,

 

    lecturing, etc. (from line

 

    1 of Schedule C or C-EZ)    

2

             

4,000             4,000

 

 ----------------------------------------------------------------------

 

 

Note.

 Complete

either

 lines 3a-3e or lines 4a-4i.

 

 • If your church provides you with a parsonage, complete lines 3a-3e.

 

 • If, instead of providing a parsonage, your church provides you with

 

   a rental or parsonage allowance, complete lines 4a-4i.

 

 ----------------------------------------------------------------------

 

 

3a

 FRV* of parsonage provided

 

    by church                    

3a

 

    -------------------------------------------------------------------

 

 

b

 Utility allowance, if any    

3b

 

    -------------------------------------------------------------------

 

 

c

 Actual expenses for

 

    utilities                    

3c

 

    -------------------------------------------------------------------

 

 

d

 Enter the smaller of line

 

    3b or 3c                    

3d

 

    -------------------------------------------------------------------

 

 

e

 Excess utility allowance

 

    (subtract line 3d from line

 

    3b)                          

3e

 

 ----------------------------------------------------------------------

 

 

4a

 Parsonage or rental

 

    allowance                    

4a

   

9,600

 

    -------------------------------------------------------------------

 

 

b

 Utility allowance, if

 

    separate                    

4b

   

1,200

 

    -------------------------------------------------------------------

 

 

c

 Total allowance (add lines

 

    4a and 4b)                  

4c

 

10,800

 

    -------------------------------------------------------------------

 

 

d

 Actual expenses for

 

    parsonage                    

4d

   

9,600

 

    -------------------------------------------------------------------

 

 

e

 Actual expenses for

 

    utilities                    

4e

     

960

 

    -------------------------------------------------------------------

 

 

f

 Total actual expenses for

 

    parsonage and utilities

 

    (add lines 4d and 4e)        

4f

 

10,560

 

    -------------------------------------------------------------------

 

 

g

 FRV* of home, plus the cost

 

    of utilities                

4g

 

10,800

 

    -------------------------------------------------------------------

 

 

h

 Enter the smaller of line

 

    4c, 4f, or 4g                

4h

                     

10,560   10,560

 

    -------------------------------------------------------------------

 

 

i

 Excess allowance (Subtract

 

    line 4h from line 4c)        

4i

               

240               240

 

 ----------------------------------------------------------------------

 

 

5  Ministerial income

 (for

 

    columns (a), (b), and (c),

 

    add lines 1 through 4i)      

5

             

35,240   10,560   45,800

 

 ----------------------------------------------------------------------

 

 

6  Percentage of tax-free income:

   Total tax-free income

 

                                      (line 5(b)) $

10,560

 

                                   ------------------------  =  

23

%**

 

                                   Total income (line 5(c))

 

                                          $

45,800

 

 ----------------------------------------------------------------------

 

 * FRV (Fair Rental Value): As determined objectively and between

 

 unrelated parties, what it would cost to rent a comparable home

 

 (including furnishings) in a similar location.

 

 ** This percentage of your ministerial expenses won't be

 

 deductible. Use Worksheets 2 and 3 to figure your allowable

 

 deductions.

 

 ======================================================================

 

 

Worksheet 2. Figuring the Allowable Deduction for Schedule C or C-EZ Expenses

 ----------------------------------------------------------------------

 

 

1  Percentage of expenses that are nondeductible

 

    (from Worksheet 1, line 6):

23

%

 

 ----------------------------------------------------------------------

 

 

2

  Business use of car for entire year:

490

 miles ×

 

    57.5 cents ($0.575).                              

2

             

282

 

 ----------------------------------------------------------------------

 

 

3

  Meals and entertainment: $______ × 50% (0.50)    

3

 

 ----------------------------------------------------------------------

 

 

4

  Other expenses (list item and amount)

 

 ----------------------------------------------------------------------

 

 

a

 

Marriage and family booklets

                     

4a

   

87

 

 ----------------------------------------------------------------------

 

 

b                                                   4b

 

 ----------------------------------------------------------------------

 

 

c                                                   4c

 

 ----------------------------------------------------------------------

 

 

d                                                   4d

 

 ----------------------------------------------------------------------

 

 

e                                                   4e

 

 ----------------------------------------------------------------------

 

 

f

 Total other expenses (add lines 4a through 4e)    

4f

             

87

 

 ----------------------------------------------------------------------

 

 

5

  Total Schedule C or C-EZ expenses (add lines 2,

 

    3, and 4f)                                        

5

             

369

 

 ----------------------------------------------------------------------

 

 

6

  Nondeductible part of Schedule C or C-EZ

 

    expenses (multiply line 5 by the percent in line

 

    1)                                                

6

             

85

 

 ----------------------------------------------------------------------

 

 

7  Deduction allowed.

* Subtract line 6 from line 5.

 

    Enter the result here and on Schedule C, line

 

    27a, or Schedule C-EZ, line 2.                    

7

             

284

 

 ----------------------------------------------------------------------

 

 * None of the other deductions claimed in this return are allocable to

 

 tax-free income.

 

 ======================================================================

 

 

Worksheet 3. Figuring the Allowable Deduction for 2106-EZ Expenses

 ----------------------------------------------------------------------

 

                                                     

Column A  Column B

 

 ----------------------------------------------------------------------

 

 

1  Percentage of expenses that are

 

     nondeductible

 (from Worksheet 1, line 6):

 

     

23

%

 

 ----------------------------------------------------------------------

 

 

2

  Use of car for church business for entire

 

     year:

2,774

 miles × 57.5 cents ($0.575).      

2

   

1,595

 

 ----------------------------------------------------------------------

 

 

3

  Meals and entertainment                        

3

 

 ----------------------------------------------------------------------

 

 

4

  Other expenses (list item and amount)

 

 ----------------------------------------------------------------------

 

   

a

 

Professional publications and booklets

         

4a

   

231

 

 ----------------------------------------------------------------------

 

   

b                                                4b

 

 ----------------------------------------------------------------------

 

   

c                                                4c

 

 ----------------------------------------------------------------------

 

   

d                                                4d

 

 ----------------------------------------------------------------------

 

   

e                                                4e

 

 ----------------------------------------------------------------------

 

 

5

  Total expenses. In Column A, add lines 2 and

 

     4a through 4e and enter the result. In

 

     Column B, enter the amount from line 3.        

5

   

1,826

 

 ----------------------------------------------------------------------

 

 

6

  Enter reimbursements received for other

 

     expenses (Column A) and meals and

 

     entertainment (Column B) that were

not

 

     included in box 1 of Form W-2                  

6

 

 ----------------------------------------------------------------------

 

 

7

  Total 2106-EZ unreimbursed

 

     expenses (subtract line 6 from line 5)        

7

   

1,826

 

 ----------------------------------------------------------------------

 

 

8

  In Column A, enter the amount from line 7. In

 

     Column B, multiply line 7B by 50% (0.50)      

8

   

1,826

 

 ----------------------------------------------------------------------

 

 

9

  Add the amounts on line 8 of both columns and

 

     enter the total here                          

9

   

1,826

 

 ----------------------------------------------------------------------

 

 

10

 Nondeductible part of 2106-EZ

 

     expenses (multiply line 9 by the percent in

 

     line 1)                                      

10

     

420

 

 ----------------------------------------------------------------------

 

 

11 Ministerial employee business expense

 

     deduction allowed.

* Subtract line 10 from

 

     line 9. Enter the result here and on

 

     Form 2106-EZ, line 6.  

11

             

1,406

 

 ----------------------------------------------------------------------

 

 * None of the other deductions claimed in this return are allocable to

 

 tax-free income.

 

 ======================================================================

 

 

 

Attachment 2--John E. White 011-00-2222

 

 

Worksheet 4. Figuring Net Self-Employment Income for Schedule SE (Form 1040)

 ----------------------------------------------------------------------

 

 

1

  W-2 salary as a minister (from box 1 of

 

    Form W-2)                                      

1

           

31,000

 

 ----------------------------------------------------------------------

 

 

2

  Net profit from Schedule C, line 31, or

 

    Schedule C-EZ, line 3                          

2

             

3,716

 

 ----------------------------------------------------------------------

 

 

3a

 Parsonage or rental allowance (from Worksheet

 

    1, line 3a or 4a)                              

3a

 

9,600

 

 ----------------------------------------------------------------------

 

 

b

 Utility allowance (from Worksheet 1, line 3b

 

     or 4b)                                        

3b

 

1,200

 

 ----------------------------------------------------------------------

 

 

c

 Total allowance (add lines 3a and 3b)          

3c

           

10,800

 

 ----------------------------------------------------------------------

 

 

4

  Add lines 1, 2, and 3c                          

4

           

45,516

 

 ----------------------------------------------------------------------

 

 

5

  Schedule C or C-EZ expenses allocable to

 

    tax-free income (from Worksheet 2, line 6)      

5

     

85

 

 ----------------------------------------------------------------------

 

 

6

  Total unreimbursed employee business expenses

 

    after the 50% reduction for meals and

 

    entertainment (from Worksheet 3, line 9)        

6

   

1,826

 

 ----------------------------------------------------------------------

 

 

7

  Total business expenses not deducted in lines

 

    1 and 2 above (add lines 5 and 6)              

7

             

1,911

 

 ----------------------------------------------------------------------

 

 

8  Net self-employment income.

 Subtract line 7

 

    from line 4. Enter here and on Schedule SE,

 

    Section A, line 2, or Section B, line 2.        

8

           

43,605

 

 ----------------------------------------------------------------------

 

 

Worksheets

These worksheets are provided to help you figure your taxable ministerial income, your allowable deductions, and your net self-employment income.

Worksheet 1. Figuring the Percentage of Tax-Free Income

 Note. For each line, enter the appropriate amount in all boxes that

 

 aren't shaded.

 

 ----------------------------------------------------------------------

 

                                               

(a)      (b)      (c)

 

        Source of Income                      Taxable  Tax-free  Total

 

 ----------------------------------------------------------------------

 

 

1

  W-2 salary as a minister

 

    (from box 1 of Form W-2)      

1

 

 ----------------------------------------------------------------------

 

 

2

  Gross income from weddings,

 

    baptisms, writing, lecturing,

 

    etc. (from line 1 of Schedule

 

    C or C-EZ)                    

2

 

 ----------------------------------------------------------------------

 

 

Note.

 Complete

either

 lines

 

 3a-3e or lines 4a-4i.

 

 • If your church provides you

 

   with a parsonage, complete

 

   lines 3a-3e.

 

 • If, instead of providing a

 

   parsonage, your church

 

   provides you with a rental or

 

   parsonage allowance, complete

 

   lines 4a-4i.

 

 ----------------------------------------------------------------------

 

 

3a

 FRV* of parsonage provided

 

    by church                      

3a

 

    -------------------------------------------------------------------

 

 

b

 Utility allowance, if any      

3b

 

    -------------------------------------------------------------------

 

 

c

 Actual expenses for utilities  

3c

 

    -------------------------------------------------------------------

 

 

d

 Enter the smaller of line 3b

 

    or 3c                          

3d

 

    -------------------------------------------------------------------

 

 

e

 Excess utility allowance

 

    (subtract line 3d from line

 

    3b)                            

3e

 

 ----------------------------------------------------------------------

 

 

4a

 Parsonage or rental allowance  

4a

 

    -------------------------------------------------------------------

 

 

b

 Utility allowance, if

 

    separate                      

4b

 

    -------------------------------------------------------------------

 

 

c

 Total allowance (add lines 4a

 

    and 4b)                        

4c

 

    -------------------------------------------------------------------

 

 

d

 Actual expenses for parsonage  

4d

 

    -------------------------------------------------------------------

 

 

e

 Actual expenses for utilities  

4e

 

    -------------------------------------------------------------------

 

 

f

 Total actual expenses for

 

    parsonage and utilities (add

 

    lines 4d and 4e)              

4f

 

    -------------------------------------------------------------------

 

 

g

 FRV* of home, plus the cost

 

    of utilities                  

4g

 

    -------------------------------------------------------------------

 

 

h

 Enter the smaller of line 4c,

 

    4f, or 4g                      

4h

 

    -------------------------------------------------------------------

 

 

i

 Excess allowance (subtract

 

    line 4h from line 4c)          

4i

 

 ----------------------------------------------------------------------

 

 

5  Ministerial income

 (for

 

    columns (a), (b), and (c),

 

    add lines 1 through 4i)        

5

 

 ----------------------------------------------------------------------

 

 

6  Percentage of tax-free income:

      Total tax-free income

 

                                            (line 5(b)) $

 

                                     --------------------------  =  %**

 

                                     Total income (line 5(c)) $

 

 ----------------------------------------------------------------------

 

 * FRV (Fair Rental Value): As determined objectively and between

 

 unrelated parties, what it would cost to rent a comparable home

 

 (including furnishings) in a similar location.

 

 ** This percentage of your ministerial expenses won't be

 

 deductible. Use Worksheets 2 and 3 to figure your allowable

 

 deductions.

 

 ======================================================================

 

 

Worksheet 2. Figuring the Allowable Deduction for Schedule C or C-EZ Expenses

 ----------------------------------------------------------------------

 

 

1  Percentage of expenses that are nondeductible

 

    (from Worksheet 1, line 6): ______%

 

 ----------------------------------------------------------------------

 

 

2

  Business use of car for entire year: ______

 

    miles × 57.5 cents ($0.575).                      

2

 

 ----------------------------------------------------------------------

 

 

3

  Meals and entertainment: $ _____ × 50% (0.50)    

3

 

 ----------------------------------------------------------------------

 

 

4

  Other expenses (list item and amount)

 

 ----------------------------------------------------------------------

 

 

a                                                   4a

 

 ----------------------------------------------------------------------

 

 

b                                                   4b

 

 ----------------------------------------------------------------------

 

 

c                                                   4c

 

 ----------------------------------------------------------------------

 

 

d                                                   4d

 

 ----------------------------------------------------------------------

 

 

e                                                   4e

 

 ----------------------------------------------------------------------

 

 

f

 Total other expenses (add lines 4a through 4e)    

4f

 

 ----------------------------------------------------------------------

 

 

5

  Total Schedule C or C-EZ expenses (add lines 2,

 

    3, and 4f)                                        

5

 

 ----------------------------------------------------------------------

 

 

6

  Nondeductible part of Schedule C or C-EZ

 

    expenses (multiply line 5 by the percent in line

 

    1)                                                

6

 

 ----------------------------------------------------------------------

 

 

7  Deduction allowed.

* Subtract line 6 from line 5.

 

    Enter the result here and on Schedule C, line

 

    27a, or Schedule C-EZ, line 2.                    

7

 

 ----------------------------------------------------------------------

 

 * None of the other deductions claimed in this return are allocable to

 

 tax-free income.

 

 ======================================================================

 

 

Worksheet 3. Figuring the Allowable Deduction for 2106-EZ Expenses

 ----------------------------------------------------------------------

 

                                                     

Column A  Column B

 

 ----------------------------------------------------------------------

 

 

1  Percentage of expenses that are

 

    nondeductible

 (from Worksheet 1, line 6):

 

    ______%

 

 ----------------------------------------------------------------------

 

 

2

  Use of car for church business for entire

 

    year: ______ miles × 57.5 cents ($0.575).    

2

 

 ----------------------------------------------------------------------

 

 

3

  Meals and entertainment                      

3

 

 ----------------------------------------------------------------------

 

 

4

  Other expenses (list item and amount)

 

 ----------------------------------------------------------------------

 

 

a                                               4a

 

 ----------------------------------------------------------------------

 

 

b                                               4b

 

 ----------------------------------------------------------------------

 

 

c                                               4c

 

 ----------------------------------------------------------------------

 

 

d                                               4d

 

 ----------------------------------------------------------------------

 

 

e                                               4e

 

 ----------------------------------------------------------------------

 

 

5

  Total expenses. In Column A, add lines 2 and

 

    4a through 4e and enter the result. In

 

    Column B, enter the amount from line 3.      

5

 

 ----------------------------------------------------------------------

 

 

6

  Enter reimbursements received for other

 

    expenses (Column A) and meals and

 

    entertainment (Column B) that were

not

 

    included in box 1 of Form W-2                

6

 

 ----------------------------------------------------------------------

 

 

7

  Total 2106-EZ unreimbursed

 

    expenses (subtract line 6 from line 5)        

7

 

 ----------------------------------------------------------------------

 

 

8

  In Column A, enter the amount from line 7.

 

    In Column B, multiply line 7 by 50% (0.50)    

8

 

 ----------------------------------------------------------------------

 

 

9

  Add the amounts on line 8 of both columns

 

    and enter the total here                      

9

 

 ----------------------------------------------------------------------

 

 

10

 Nondeductible part of 2106-EZ

 

    expenses (multiply line 9 by the percent in

 

    line 1)                                      

10

 

 ----------------------------------------------------------------------

 

 

11 Ministerial employee business expense

 

    deduction allowed.

* Subtract line 10 from

 

    line 9. Enter the result here and on

 

    Form 2106-EZ, line 6.  

11

 

 ----------------------------------------------------------------------

 

 * None of the other deductions claimed in this return are allocable to

 

 tax-free income.

 

 ======================================================================

 

 

Worksheet 4. Figuring Net Self-Employment Income for Schedule SE (Form 1040)

 ----------------------------------------------------------------------

 

 

1

  W-2 salary as a minister (from box 1 of

 

    Form W-2)                                        

1

 

 ----------------------------------------------------------------------

 

 

2

  Net profit from Schedule C, line 31, or

 

    Schedule C-EZ, line 3                            

2

 

 ----------------------------------------------------------------------

 

 

3a

 Parsonage or rental allowance (from Worksheet

 

    1, line 3a or 4a)                                

3a

 

 ----------------------------------------------------------------------

 

 

b

 Utility allowance (from Worksheet 1, line 3b or

 

    4b)                                              

3b

 

 ----------------------------------------------------------------------

 

 

c

 Total allowance (add lines 3a and 3b)            

3c

 

 ----------------------------------------------------------------------

 

 

4

  Add lines 1, 2, and 3c                          

4

 

 ----------------------------------------------------------------------

 

 

5

  Schedule C or C-EZ expenses allocable to

 

    tax-free income (from Worksheet 2, line 6)      

5

 

 ----------------------------------------------------------------------

 

 

6

  Total unreimbursed employee business expenses

 

    after the 50% reduction for meals and

 

    entertainment (from Worksheet 3, line 9)        

6

 

 ----------------------------------------------------------------------

 

 

7

  Total business expenses not deducted in lines

 

    1 and 2 above (add lines 5 and 6)                

7

 

 ----------------------------------------------------------------------

 

 

8  Net self-employment income.

 Subtract line 7

 

    from line 4. Enter here and on Schedule SE,

 

    Section A, line 2, or Section B, line 2.        

8

 

 ----------------------------------------------------------------------

 

 

How To Get Tax Help

If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, forms, or instructions, go to IRS.gov and find resources that can help you right away.

Preparing and filing your tax return. Find free options to prepare and file your return on IRS.gov or in your local community if you qualify.

 

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities, the elderly, and limited-English-speaking taxpayers who need help preparing their own tax returns. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors.

Getting answers to your tax law questions. On IRS.gov get answers to your tax questions anytime, anywhere.

 

Tax forms and publications.

You can download or print all of the forms and publications you may need on

http://www.irs.gov/formspubs.

Otherwise, you can go to

http://www.irs.gov/orderforms

to place an order and have forms mailed to you. You should receive your order within 10 business days.

Direct deposit. The fastest way to receive a tax refund is by combining direct deposit and IRS e-file. Direct deposit securely and electronically transfers your refund directly into your financial account. Eight in 10 taxpayers use direct deposit to receive their refund. The majority of refunds are received within 21 days or less.

Getting a transcript or copy of a return.

 

Using online tools to help prepare your return.

Go to IRS.gov and click on the Tools bar to use these and other self-service options.

 

For help with the alternative minimum tax, go to IRS.gov/AMT.

Understanding identity theft issues.

 

Checking on the status of a refund.

 

Making a tax payment.

The IRS uses the latest encryption technology so electronic payments are safe and secure. You can make electronic payments online, by phone, or from a mobile device. Paying electronically is quick, easy, and faster than mailing in a check or money order. Go to

http://www.irs.gov/payments

to make a payment using any of the following options.

 

What if I can't pay now?

Click on the "Pay Your Tax Bill" icon on IRS.gov for more information about these additional options.

 

Checking the status of an amended return.

Go to IRS.gov and click on the Tools tab and then

Where's My Amended Return?

Understanding an IRS notice or letter. Enter "Understanding your notice" in the search box on IRS.gov to find additional information about your IRS notice or letter.

Visiting the IRS. Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS.gov. Enter "office locator" in the search box. Or choose the "Contact Us" option on the IRS2Go app and search Local Offices. Before you visit, use the Locator tool to check hours and services available.

Watching IRS videos. The IRS Video portal http://www.irsvideos.gov contains video and audio presentations for individuals, small businesses, and tax professionals. You'll find video clips of tax topics, archived versions of panel discussions and Webinars, and audio archives of tax practitioner phone forums.

Getting tax information in other languages. For taxpayers whose native language is not English, we have the following resources available.

 

The Taxpayer Advocate Service Is Here To Help You

What is the Taxpayer Advocate Service?

The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service that helps taxpayers and protects taxpayer rights. Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.

What Can the Taxpayer Advocate Service Do For You?

We can help you resolve problems that you can't resolve with the IRS. And our service is free. If you qualify for our assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:

 

How Can You Reach Us?

We have offices in every state, the District of Columbia, and Puerto Rico. Your local advocate's number is in your local directory and at http://www.taxpayeradvocate.irs.gov. You can also call us at 1-877-777-4778.

How Can You Learn About Your Taxpayer Rights?

The Taxpayer Bill of Rights describes ten basic rights that all taxpayers have when dealing with the IRS. Our Tax Toolkit at http://www.taxpayeradvocate.irs.gov can help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.

How Else Does the Taxpayer Advocate Service Help Taxpayers?

TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at http://www.irs.gov/sams.

Low Income Taxpayer Clinics

Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. To find a clinic near you, visit http://www.irs.gov/litc or see IRS Pub. 4134, Low Income Taxpayer Clinic List.