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.