Figure the allowable deduction for a minister's Schedule C expenses
According to IRS Publication 517, you should reduce expenses related to a minister's Schedule C income (for example, payments for marriages, baptisms, and funerals) by the minister's percentage of tax-free income.
UltraTax CS uses Worksheets 1 and 2 from Publication 517 to figure the deductible portion of a minister's Schedule C expenses. You can find the worksheets in the Clergy folder in Form view.
Follow these steps to figure the deductible portion of Schedule C expenses.
- Enter the minister's Schedule C income and expenses in theCscreen in the Business folder.
- Mark theMinister, clergy, or religious workercheckbox on theCscreen.noteThe calculation of deductible expenses includes any Schedule C input screen units marked withMinister.
- If the minister needs to pay self-employment (SE) tax, leave theSelf-employment codeon theCscreen blank. Otherwise, enterCode 2 (Minister [Exempt])if the minister is exempt from SE tax.
- Enter the minister's parsonage and allowance items, if necessary.
- Select Form view to view the clergy worksheets.
- UltraTax CS completes Worksheet 1 to show the percentage of tax-free income, if any, and then transfer that percentage to Worksheet 2, line 4. Then, the nondeductible portion of expenses calculates on line 6.
- The portion of nondeductible expenses calculates on Schedule C, Page 2, under Part V, as a negative expense. This amount transfers as a negative expense (for example, addback) to Schedule C, Line 27.
