Ministers, Priests, Rabbis and Social Security Tax

If you are a member of the clergy, you may be aware that you can opt out of the Social Security system. However, there are strict and timely procedures to follow.  This exemption only applies to your ministerial services such as performing sacerdotal functions, conducting religious worship, controlling, conducting, and maintaining religious organizations that are under the authority of a religious body that is a church or denomination.     

There are several conditions that must be met to claim the exemption. If you meet all of the conditions (listed in IRS Pub 517), you must file IRS Form 4361 by the due date of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment income. Part of these earning must have been from ministerial services. Also, the 2 tax years don’t have to be consecutive. The IRS tends to be unforgiving relative to this deadline, so timeliness is extremely important.

The IRS will notify you about you application status. If you are approved, you’ll receive a copy of your 4361 stating so. Be sure and keep this copy for your records, and present it to your tax preparer at tax time.   

If you are granted an exemption to paying Social Security tax, you should be saving for your retirement through some other vehicle. If your church offers a retirement plan, consider participating. Also, you can set up an IRA for yourself. If you have enough self-employment income, you may be able to set up a SEP-IRA and save even more money for your retirement.

Also remember that ministers are not exempt from federal income tax or non-ministerial self-employment tax. The US has a multitude of tax systems. Form 4361 only applies to be exempt from Social Security tax on ministerial income.   

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