• By John Stancil
  • / February 3, 2017
  • / Clergy
  • / Tags:

A minister who wishes to be exempt from social security/Medicare tax must file a Form 4361 with the IRS for approval. Before your application can be approved, the IRS must verify that you are aware of the grounds for exemption and that you want the exemption on that basis.

When your completed Form 4361 is received, the IRS will mail you a statement that describes the grounds for receiving an exemption under section 1402(e). You must certify that you have read the statement and seek exemption on the grounds listed on the statement. The certification must be made by signing a copy of the statement under penalties of perjury and mailing it to the IRS not later than 90 days after the date the statement was mailed to you. If it is not mailed by that time, your exemption will not be effective until the date the signed copy is received by the IRS. So it is extremely important to complete this last step, or you will not be exempt. Once the IRS approves it, you will receive a copy marked approved.

The grounds for opting out are not economic or non-religious, but are based on opposition to the acceptance of public insurance with respect to services performed as a minister. It should be noted that the opting out only applies to ministerial earnings. A minister is not being inconsistent in accepting SS or Medicare benefits from non-ministerial earnings.

In order to opt out, the minister must file Form 4361 no later than the due date (with extensions) for the tax return for the second year in which the minister had net ministerial income of $400 or more. The minister must be ordained, licensed, or commissioned by a church or religious denomination. If not ordained, the earnings are not ministerial earnings and not eligible for the exemption. So an individual may serve for 20 years as an unordained worship minister and cannot opt out. If he then is ordained, he may opt out at that point as his salary from the church becomes ministerial earnings.

The opting out is irrevocable, once out, the minister cannot revoke the election.

The approved Form 4361 is an important document. And the minister should keep a copy. In addition, a copy of the approved form should be provided to any employer from which the minister receives a salary. A copy should also be given to the tax return preparer for his/her records.

If you have lost the form, there are three ways to confirm the exemption:

1. For ministers who filed the Form 4361 after 1988, the minister may order a transcript for any year in which the minister was exempt. Included on this transcript should be an indicator that shows the exemption. This can be obtained by going to www.irs.gov and click on “Get a Tax Transcript.” Normally, the transcript is immediately available.

2. If the transcript is not an option, the minister can contact the Taxpayer Relations Branch at the IRS Service Center where the Form 4361 was filed and request a copy of the form.

3. The last option is to contact the Social Security Administration in Baltimore and ask them to provide confirmation of a minister’s exempt status. That address is

Social Security Administration
Office of Central Records Operations
Metro West Building
300 North Green St
Baltimore MD 21201

Technically, if a minister cannot produce an approved copy of Form 4361, he or she is no longer exempt. So guard it as if it were cash, it is a valuable asset.

This blog post was also posted on TaxConnections.com. Click Here to read more articles written by John Stancil.

John Stancil

Dr. John Stancil has been a CPA since 1979 in the states of Kentucky and Florida. He is a graduate of Mars Hill University, the University of Georgia, and the University of Memphis – holding a Doctor of Business Administration in Accounting. He is a Professor Emeritus of Accounting and Tax at Florida Southern College after 37 years in the teaching profession.

He continues to maintain his tax practice of over 35 years, specializing in taxes, tax planning, and consulting. In addition to the CPA certification, John is also a CMA and CFM. He is a leading expert in tax matters on AllExperts and is a regular blogger for Tax Connections. He has written several academic papers in the area of taxation, and often serves as a speaker to professional and civic groups on various taxation topics. John is a member of the Florida Institute of CPA’s, the National Association of Tax Professionals, the Institute of Management Accountants, and Lakeland Business Leaders. He is the Lead Blogger on Church and Clergy Taxes for Tax Connections as well as a tax writer for CPAmerica.

He has spoken to many professional and community groups on various tax topics, including addressing the National Association of Tax Professional on Church and Clergy Tax Issues and the Small Business Health Care Tax Credit.

John’s civic involvement extends to service on the boards of several not-for profit organizations. Currently, he is an advisor to PowerPoint Ministries, Inc. and ElderPoint Ministries, serves as chair of the Finance Team at Legacy Christian Church, and is a member of the Income Steering Committee for United Way of Central Florida.

In addition to servicing clients in Alabama, Arizona, California, Georgia, Florida, Kentucky, Mississippi, North Carolina, Ohio, South Carolina, Tennessee, Illinois, Virginia, Texas, Washington, and other states, John has several international clients. He serves as a consultant to local tax preparation and CPA firms as well.