Level 3

Form 4361 SE exemption for Ministers

Forum|Forum|2 years ago
September 30, 2023
3 replies
22 views

Background: A retired, single client of mine felt called to be a minister. She was Ordained by her church body in the current tax year. She has been receiving Social Security benefits (including Medicare coverage) for many years given her advanced age and prior career. She also has had investment income, SS, interest income for the last couple of years and a W-2 as a church employee (not clergy/minister). That W-2 income has been taxable for SE purposes since her church/employer is exempt from withholding SS & Medicare tax on employee earnings. But for the upcoming return she will be classed as Clergy/Minister and could apply for exemption from SE tax on her wage income as such, using IRS Form 4361. As I understand it, the Exemption has to be approved by the IRS before it can be used on a tax return and it would only apply to the earnings from her Clergy position.

QUESTION: Is there any effect on her existing SS / Medicare benefits she earned while in an earlier career, pre-retirement if the Request for SE Exemption (Form 4361) gets approved? Or do those previously earned benefits continue as they have always been once the SE Exemption on Ministerial earnings is approved by the IRS?

Tax Talk

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BobKamman

Level 15

She is clearly struggling with the moral and ethical implications of claiming she is opposed to Social Security and Medicare, while accepting their benefits on a daily and monthly basis. But having paid the taxes, she has earned them and they can't be taken away. As with a lot of religion, she just has to pay lip service to the required assertion of opposition, in order to benefit from the clergy loophole.

qbteachmt

Level 15

Whew.

Medicare is not a Social Security benefit.

If she pays into SS from working while also collecting, her benefit might increase. Has she considered that scenario?

Don't yell at us; we're volunteers

jritchieAuthor

Level 3

Agreed - I should have said on her SS Statement for the year she is paying Medicare premiums.

T

TaxGuyBill

Level 15

@jritchie wrote:

W-2 as a church employee (not clergy/minister) ... That W-2 income has been taxable for SE purposes since her church/employer is exempt from withholding SS & Medicare tax on employee earnings

This isn't your question, but unless I'm missing something, no, the church/employer is not exempt from withholding Social Security and Medicare taxes for a non-minister. If the church as been doing that, they are doing it wrong.