Those outside paid ministry think that ministry is just about hearing and answering a call. But there is much to deal with on the side of the minister’s salary and relationship with the government.
Ministers have very special tax and income situations. This includes things like a housing allowance, employment status (self employed or employee), and social security. Ministers also have options for student loan debt forgiveness.
General Facts about Social Security and Minister’s Salary
A minister’s salary, for ministerial duties, is always subject to self-employment tax. This means that a minister will pay 15.3% of his income towards social security. This SECA (Self-Employment Contributions Act) applies unless a minister opts out.
How to Opt Out of Social Security
If you wish to opt out of social security, you must complete, file, and be approved using Form 4361 from the IRS.
The form is short and simple.
However, your can only fill out the form if you oppose (conscientiously or because of your religious convictions) accepting any form of public insurance. You will need to sign the form stating such an objection.
You should notify your church that you are opposed to public insurance so they can keep this information in their records.
File the form within two years of becoming a paid minister.
Note of Caution Regarding Social Security Opt Out Filing
Here is the exact wording on the Application for Exception from self-employment tax and use by ministers, members of religious orders, and Christian science practitioners:
I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister …) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes a payment towards the cost of, or provides services for, medical care.
Your can only fill out the form if you oppose (conscientiously or because of your religious convictions) accepting any form of public insurance.
It is very, very important to note that a minister cannot opt out of social security because it will save them money or it is a wise stewardship decision. To do this is to lack integrity.
Notice also, that this exception applies only to ministerial duties and pay. If, in later years, you work in the secular job field, you will still be required to pay social security.
As such, I believe if you do opt out you should, due to your conscientious beliefs, refuse to accept social security payments ever.
How to Opt Back into Social Security
If you come to find that you opted out for the wrong reasons, you can revoke your social security exception. You only get to do it once, so you must stand by this final decision.
Why Would Someone Opt Back Into Social Security?
- You used to have a conscientious objection, but your views and beliefs have changed.
- You never had a conscientious objection; you opted out (intentionally or unintentionally) for the wrong reasons.
To opt back into Social Security, you need to file an IRS form 2031. Once again, the form is short and sweet.
Why I Opted Out and Back In Again
When I stared my first ministry job, I was pretty clueless about all these financial details regarding ministers and taxes. Basically, a church treasurer came into my office and asked if I’d filed my Form 4361. He went on to say how jealous he was that ministers get to opt out. I filled out the form and sent it away like it was a housekeeping task everyone should do – kind of like getting a license when you turn 16.
When I got the approval and paperwork back and I was starting to move out of new ministry survival mode, I started reading through the documentation more closely. I quickly realized the requirements did not describe me. I’m not a fan of Social Security, but I wouldn’t tell my wife in my last dying breath to be sure that the government didn’t give her any money. So, I filed Form 2031 and opted back into Social Security. I still feel like that decision cost me tens of thousands if not hundreds of thousands of dollars, but when something is the right thing to do, the discussion ends there.
Can you think of Biblical reasons to opt out of social security? Do you think ministers should have a choice to opt out of social security?
Other Great Articles:
- Understanding Your Social Security Statement
- Student Loan Debt Forgiveness | For Ministers & Non-Profit Workers
- Groupon and Living Social Get a Yellow Light
- Passwords Security | How To Safely Store Passwords
- The Beginner’s Guide to Self Employed Tax
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{ 17 comments… read them below or add one }
Good blog – personal integrity is key for all Christians but especially pastors and elders. Not because you don’t know it but just to ensure the point is driven home…I would add Matthew 15:16b-21 (NIV):
“Teacher,” they said, “we know you are a man of integrity and that you teach the way of God in accordance with the truth. You aren’t swayed by men, because you pay no attention to who they are. Tell us then, what is your opinion? Is it right to pay taxes to Caesar or not?” But Jesus, knowing their evil intent, said, “You hypocrites, why are you trying to trap me? Show me the coin used for paying the tax.” They brought him a denarius, and he asked them, “Whose portrait is this? And whose inscription?” “Caesar’s,” they replied. Then he said to them, “Give to Caesar what is Caesar’s, and to God what is God’s.”
@Erik
I do think a key element in this discussion is integrity. Thanks for the solid reminder.
Craig,
I think it’s interesting that the language always includes the “(for services I perform as a minister…)” on the form. It seems to me that a person could have objections or convictions against receiving Social Security on ministerial pay but not on other pay. At least, it must be possible because the requirements to file this form are much less stringent than the requirements for Form 4029, which applies to anyone. You pretty much have to be in an Old Order Mennonite or an Amish church to qualify for that form. I know many ministers have used Form 4361 and have not been in those churches.
Anyway, it is an interesting discussion. I agree that integrity is crucial for our witness, but I think this form would allow a minister to refuse Social Security on his ministerial pay while accepting it on other pay without compromising his integrity.
@Paul
Good point about the ‘services as a minister.’ I see how a person could opt out and still collect it on other income.
@Paul
“this form would allow a minister to refuse Social Security on his ministerial pay while accepting it on other pay without compromising his integrity.”
Isn’t that hypocrisy?
As a minister, he signs up for 4631; it’s states that he can only do so on religious ground, not economic reason and that he’s opposed to public assistance. So on the ministerial pay, he rejects govt. assistance but when it’s time to obtain social security/medicare/medicaid thru his secular pay, he gladly receives it? How do ministers be able to preach God’s word to the congregation: render to Caesar what’s due to Caesar, trusting in Him to provide for our needs, let your yea be yea and nay be nay, etc? Where is the integrity? Does that mean, as a servant of God, if the govt. gives me a loop-hole, I’ll fully intend to make use of it: even tho I don’t really conscientiously object to Social Security on religious grounds but it’s to my convenience when to object paying self-employment tax on ministerial pay and when to receive the benefits when it’s time to do so?
Craig,
Do you know the purpose of the two year clause for opting out? I assume it is because if a minister is conscientiously opposed, he would figure that out within two years of beginning ministry. Somehow that doesn’t seem fair because not everyone clarifies their ideology within two years of beginning work. On the other hand, a minister can wait several years, evidently, to decide he is NOT opposed.
@Joe
.
I tried not to figure out why the government does anything it does
Is the an option to opt back into ss now? aug. 2010
I am a church treasurer and was told by our CPA that our Pastor, who is presently drawing social security could opt out, still continue drawing his usual amount but not have to pay social security taxes in the future. Is this correct?
@Ellen
You’ll need to check with a legal adviser, but what you are describing sounds like what the law describes. When a minister opts out you no longer withhold social security.
Thank you for your blog! Your situation about opting out of SS sounds way too familiar to mine. I was a very young youth minister and was misguided by peers in the church I served in to fill out 4361. It was approved and I worked a total of 3 years at the church but only two years were exempt from SS tax because I was ordained a year later. Since then, I have decided to go back to college to pursue my degree to be a minister. I have now been educated about what I did and I have a wife and son now to think about. Can I still opt back in currently 12/2011 and if so, what consequences will I have to pay?
Will,
You’ll need to check with a lawyer or CPA as it has been a long time since I’ve looked into this. However, if memory serve me correctly you have a time limit to opt back in. I think you’ve passed that limit and opting back into social security is not possible. Please verify that information as I’m just sharing old facts I think I remember reading.
I do know if you opt back in you won’t ever be able to opt back out again.
I am a 100% disabled veteran, I receive SSI as well as a VA pension. We are starting a new church, praise God. I want to do everything in order. Should I except a salary from the church, will it effect my SSI if I do?
Brenda,
I all depends 100% on your conscience. Are you morally opposed to SSI? If yes then opt out. If not, you cannot.
From what I am reading elsewhere, it seems that the opportunity to opt back in ended in 2002. If you look at the IRS form, it has a date of 2000 on it. There was a 2-year window of time. Bad news for my music pastor who would like to get back in.
I am also looking for a way to opt back into Social Security after opting out 19 years ago as a clergy. I have read the IRS Manual, looked over the forms 2031 and 4361 and it does not look promising. What I have read looks like the window of opportunity is not open to opt back in. If the original reason you opted out was financial, it looks like that may be a loop hole in the orginal application to be exempted and that would be grounds that it could be revoked, and I suspect maybe 3 years of back pay of Social Security would come even if that worked. I would love to hear from someone who knows the real answer.
I honestly don’t think it’s possible, but it would be nice if a CPA or lawyer coud chime in.