Clergy Tax Issues – Vol 5 of 8: Can Clergy Opt-Out of the Social Security System for Ministerial Wages?
Clergy Tax Issues – Vol 5 of 8: Can Clergy Opt-Out of the Social Security System for Ministerial Wages?
The answer is yes and no…it all depends on whether your fall within the IRS guidelines for doing so. It is so unfortunate that too many clergy have been misadvised that all they have to do to avoid paying self-employment (SECA) taxes is to complete an IRS from and declare that they choose to be exempt.
Clergy who fall within the IRS guidelines have until the end of the second year in which they have received over $400/compensation per year for ministry to file Form 4361.
The catch here is that opting out of the self-employment tax system is only allowed when the clergy has a conscientious objection to the government insurance system. Or, if the clergy is part of a denomination that objects to the government retirement insurance system and/or their denomination replaces the government system because the denomination provides care for the entire life of the clergy.
Economics and retirement planning have no part in the decision to opt out of the SECA system.
Is this a decision that you can, in good conscience, say you are making for conscientious reasons?
Please see Clergy Tax related blogs here.