Enter the numbers on the 1099-R worksheet with the gross amount on line 4a and the amount reached by subtracting the parsonage expenses on line 4b.  This will have your client taxed on the amount left from the original payment after subtracting the parsonage expenses. This bothers me in that in prior years I have always shown the amount of parsonage expenses as a negative number so you may want to put that information in the Preparer Notes section.