Ministers’ Exemption from Self-Employment Taxes

Ministers who want to request an exemption from self-employment taxes (i.e. Social Security and Medicare) can apply for this treatment via Form 4361 with the IRS. The form must be approved by the IRS to be effective, and the minister must retain the approval notice for all years of pastoral employment (and beyond that in case of an IRS audit). Here are four things that ministers need to know about exemption from self-employment taxes:

  1. Form 4361 requesting exemption from self-employment taxes must be filed in triplicate with the federal tax return (no later than the due date) for the second year in which the minister receives $400 or more in ministerial compensation.
  2. To be effective, the minister-petitioner must receive back one of the triplicate forms filed with the IRS indicating approval. (Keep several copies of the approved form in different locations, paper and digital.)
  3. If the IRS approved Form 4361 is lost or destroyed, and the minister’s tax return is audited; then the minister is technically not exempt, and may have to pay accrued self-employment taxes including interest and penalties. (It is possible to fight the battle to prove exemption, but the burden of proof rests with the minister, not the IRS.)
  4. If you had an approved Form 4361 and it is lost or destroyed, contact the person who prepared your tax return to see if they retained a copy of the form.

If you have an approved Form 4361, or are contemplating exemption from self-employment taxes, a Contact Christina Nichols, Salmon Sims Thomas Accountants and Consultants.