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Ministers Opting Out of Social Security

Individuals who qualify for ministerial tax treatment are always subject to the Self Employment Contributions Act (SECA) social security system for services performed in the exercise of ministry unless an exemption has been received from the IRS based on the filing with an approval by the IRS of Form 4361.

To claim the exemption from self-employment tax, a minister must:

  • File Form 4361
  • Be conscientiously opposed to public insurance (which includes insurance systems established by the Social Security Act)
  • Desire to opt out because of their individual religious considerations (not because of their general conscience), or because of the principles of their religious denomination--either opposition must be based on religious belief.
  • File for other than economic reasons
  • Inform the ordaining, commissioning, or licensing body of their church or religious order that they are opposed to public insurance. This includes an opposition for insurance that helps pay for or provide services for medical services (such as Medicare) and social security benefits.
  • Establish that the religious organization that ordained, commissioned, or licensed the individual is a tax-exempt religious organization.
  • Establish that the organization is a church, convention or association of churches.
  • Sign and return the statement IRS mails to the individual to verify that they are requesting an exemption based on the grounds listed on the statement.

Deadline for filing. The application for exemption from self-employment tax must be filed by the date the minister’s tax return is due, including extensions, for the second year in which the minister had net ministerial income of $400 or more. These do not have to be consecutive tax years.

Basis for filing for an exemption from social security tax. Neither economics nor any other nonreligious reason is a valid basis for the exemption. Many ministers are improperly counseled to opt out of social security because it may not be a "good investment." A minister's view of the soundness of the social security program has absolutely no relationship to the application for exemption. Further, there is no basis to opt out of social security because a minister objects to paying the tax or the level of tax paid.

A fundamental consideration is the minister’s ability to sign Form 4361 with a clear conscience. Key words in qualifying for exemption from social security coverage on ministerial earnings are "religious principles" and "conscientiously opposed to the acceptance of any public insurance." Religious principles do not simply consist of the conviction that perhaps social security will not be there when you retire or that a better retirement can be purchased through an annuity or other retirement program. The belief must be an integral part of the minister’s system of beliefs, the minister?s theology.

If a minister opts out and does not have sufficient credits from prior employment or from future non-ministerial employment, neither the minister nor his or her dependents will be covered under social security benefits, survivors’ benefits, or Medicare. The decision to opt out of social security should not be taken lightly. First, a minister must act on religious convictions. If a minister untruthfully signs Form 4361, he or she has committed perjury. Second, a minister must be prepared financially with alternatives to the benefits of social security coverage.

 

 


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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