Prior to 1968 a member of the clergy had to elect to be covered by social security.
If you are duly ordained, commissioned, or licensed minister of a church, you are covered by social security and Medicare under the self employment tax provisions for the services you perform in your capacity as a minister unless you have requested and received a tax exemption from self employment tax. This is true whether you are an employee of your church or a self employed person under the common law rules.
Unless an ordained member of the clergy objects to social security benefits based upon conscientious or religious grounds he/she is subject to self employment tax. To object you must file
Form 4361. The form must be filed before the due date of your tax return for the second taxable year in which you earned $400 or more from work as a member of the clergy. The social security self employment tax exemption is irrevocable.
What is duly ordained, commissioned, or licensed minister of a church? The term duly ordained minister of religion means a person: {who has been ordained in accordance with the ceremonial ritual or discipline of a church, religious sect, or organization established on the basis of a community or faith and belief, doctrines and practices of a religious character}, {who preaches and teaches the doctrines of such church, sect or organization}, {who administers the rites and ceremonies thereof in public worship}, {who, as his/her regular and customary vocation, preaches and teaches the principles of religion}, and {who administers the ordinances or sacerdotal duties of public worship as embodied in the creed or principles of such church, sect or organization}.
Although as a licensed ordained, commissioned or licensed minister you are considered a self employed individual for social security purposes, you may be considered an employee for other tax purposes or putting it bluntly you are considered an employee by the IRS.
Self employment tax does not apply to any post-retirement benefits or the rental value of any parsonage or parsonage allowance.
Under these tax rules, you are considered an employee or a self employed person depending on all the facts and circumstances. Generally, you are an employee if your employer has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action.
If you are not considered an employee in performing your ministerial services, you will figure taxable net earnings on Form 1040,
Schedule C. Figure your self employment tax on Form 1040,
Schedule SE. If you earn or receive taxable income during the tax year that is not subject to tax withholding, or if you do not have enough income tax withheld, you may have to pay estimated tax.
The law requires all churches to apply for an Employer’s Identification Number (EIN) even if they do not have employees. Much like an individual’s social security number, your EIN (federal identification number) is used as an identifier on all federal tax returns and on all correspondence with the IRS. A State tax number should not be confused with a Federal Employer’s Identification Number (FEIN). Possession of an EIN is NOT evidence of tax-exempt status. You can apply for your EIN (
Form SS-4) immediately from the comfort of your computer.