You can request an exemption from SE tax if you are one of the following.
- A minister.
- A member of a religious order who has not taken a vow of poverty.
- A Christian Science practitioner.
- A member of a recognized religious sect.
Generally, members of religious orders who have taken a vow of poverty are exempt from paying SE tax, as discussed earlier under Members of Religious Orders
. They do not have to request the exemption.
You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. These elections are irrevocable.
- You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year.
- You elected before 1968 to be covered under social security for your ministerial services.
Table 2 briefly summarizes the procedure for requesting exemption from the SE tax. More detailed explanations follow.
If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for qualified services, discussed later. It does not apply to any other self-employment income.
To claim the exemption from SE tax, you must meet all of the following conditions.
- You file Form 4361, described later under Requesting Exemption—Form 4361.
- You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination.
- You file for other than economic reasons.
- You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). This requirement does not apply to Christian Science practitioners.
- You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization.
- You establish that the organization is a church or a convention or association of churches.
- You did not make an election discussed earlier under Who cannot be exempt..
- You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement.
To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS.
The IRS will return to you a copy of the Form 4361 that you filed indicating whether your exemption has been approved. If it is approved, keep the approved copy in your permanent records.
File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which you have net earnings from self-employment of at least $400. This rule applies if any part of your net earnings for each of the 2 years came from your services as a:
- Member of a religious order, or
- Christian Science practitioner.
The 2 years do not have to be consecutive tax years.
The approval process can take some time, so you should file Form 4361 as soon as possible.
Rev. Lawrence Jaeger, a clergyman ordained in 2009, has net self-employment earnings of $450 in 2009 and $500 in 2010. He must file his application for exemption by the due date, including extensions, for his 2010 income tax return. However, if Rev. Jaeger does not receive IRS approval for an exemption by April 15, 2011, his SE tax for 2010 is due by that date. taxmap/pubs/p517-001.htm#en_us_publink100033552
Rev. Louise Wolfe has $300 in net self-employment earnings as a minister in 2009, but earned more than $400 in 2008 and expects to earn more than $400 in 2010. She must file her application for exemption by the due date, including extensions, for her 2010 income tax return. However, if she does not receive IRS approval for an exemption by April 15, 2011, her SE tax for 2010 is due by that date. taxmap/pubs/p517-001.htm#en_us_publink100033553
In 2007, Rev. David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. In 2008, he received $1,000 as a minister, but his related expenses were over $1,000. Therefore, he had no net self-employment earnings as a minister in 2008. Also in 2008, he opened a book store and had $8,000 in net self-employment earnings from the store. In 2009, he had net earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store.
Rev. Moss had net earnings from self-employment in 2007 and 2009 that were $400 or more each year, and part of the earnings in each of those years was for his services as a minister, so he must file his application for exemption by the due date, including extensions, for his 2009 income tax return. taxmap/pubs/p517-001.htm#en_us_publink100033554
The right to file an application for exemption ends with an individual's death. A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. taxmap/pubs/p517-001.htm#en_us_publink100033555
An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of the earnings is for services as a member of the clergy. Once the exemption is approved, it is irrevocable. taxmap/pubs/p517-001.htm#en_us_publink100033556
Rev. Trudy Austin, ordained in 2006, had $400 or more in net self-employment earnings as a minister in both 2006 and 2009. She files an application for exemption on February 19, 2010. If an exemption is granted, it is effective for 2006 and the following years.taxmap/pubs/p517-001.htm#en_us_publink100033557
If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X before the period of limitations ends. This is generally within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date.
If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. taxmap/pubs/p517-001.htm#en_us_publink100033558
If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your wages and self-employment income.taxmap/pubs/p517-001.htm#en_us_publink100033559
If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. However, if you pay your benefits back, you may be considered for exemption. Contact your local Social Security Administration office to find out the amount to be paid back. taxmap/pubs/p517-001.htm#en_us_publink100033560
To claim this exemption from SE tax, all the following requirements must be met.
- You must file Form 4029, discussed later on this page under Requesting Exemption—Form 4029.
- As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care.
- You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income.
- The Commissioner of Social Security must determine that:
- Your sect or division has the established teachings as in (2) above,
- It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and
- The sect or division has existed at all times since December 31, 1950.
To request the exemption, file Form 4029 in triplicate with the Social Security Administration at the address shown on the form. The sect or division must complete part of the form.
The IRS will return to you a copy of the Form 4029 that you filed indicating whether your exemption has been approved. If it is approved, keep the approved copy in your permanent records.
You can file Form 4029 at any time.
If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. See Effective date of exemption, below, for information on when the newly approved exemption would become effective.
If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029.taxmap/pubs/p517-001.htm#en_us_publink100033564
An approved exemption generally is effective on the first day of the first quarter after the quarter in which Form 4029 is filed. For example, if you meet all eligibility requirements and file Form 4029 on January 30, 2010, and your exemption is approved, it will become effective on April 1, 2010.
The exemption does not apply to any tax year beginning before you meet the eligibility requirements discussed earlier.
The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. The exemption will end on the date you notify the IRS. taxmap/pubs/p517-001.htm#en_us_publink100033565
To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. For information on filing this form, see Refunds of SE tax
. under Requesting Exemption—Form 4361
Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee.
A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose.
If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications.
If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages.
If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. taxmap/pubs/p517-001.htm#en_us_publink100033569
When preparing a Form W-2 for an employee with an approved Form 4029, enter "Form 4029" in box 14, "Other." Do not make any entries in boxes 3, 4, 5, or 6. taxmap/pubs/p517-001.htm#en_us_publink100033570
If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. Instead, follow the instructions given below.
- Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter "Form 4029" in the empty space below the check box.
- Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter "Form 4029" to the right of the wage entry spaces on lines 2 and 4.
- Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter "Form 4029" in the empty space below the check box.
An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which Form 4029 is filed. The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements.