Ministers and Pastors Social Security Tax | Should You Opt Out?

Print Friendly

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?

Comments

  1. says

    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.”

  2. says

    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.

      • Mm Ee C says

        @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?

  3. says

    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.

  4. Ellen Reed says

    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?

    • says

      @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.

  5. Will says

    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?

    • says

      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.

  6. Pastor Brenda Jenkins says

    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?

  7. Rick says

    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.

  8. E Denice says

    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.

  9. says

    Good discussion. The window is closed. Form 2031 can no longer be filed. Maybe the opportunity will arise again (although nothing seems to be in the works to that end). As of today if you have a 4361 on file you cannot revoke the election to opt-out.

  10. Nathan says

    The reason this clause exists is that a foundational belief in this country is the seperation of church and state. It is not against government assistance in general, only that the church should not use the State as a retirement agency. As our private colleges receive more threats over issues relating to sexuality, the threat is often that they will not be eligible for federal funding if institutions do not comply. The seperation of church and State is important to safe-gaurd the church against an increasingly secular state. A minister may feel called in later life to go and become a citizen elsewhere, thereby losing his state based retirement. There have been times when standing for the church meant standing against the state, and it complicates matters when the church uses the State as it’s primary method of retirement. Even if a miniser ops out, if he works in other line of employment, he is required to pay into social security. It’s not about being ethically opposed to the whole system of public insurance (the state doesn’t allow ministers, or whoever, who work at Walmart to not pay in), but only around issues surrounding ordained salary. I feel many ministers stay in social security because of well meaning collegues who paint it as some of kind ‘greater integrity’; this misses the point of the whole discussion. There may be reasons for the church to partner with the State, but that’s where the issue needs to be discussed.

  11. Kraig says

    Craig,

    What if you didn’t opt out, but now your conscience has changed? I can see how a guy would believe that his church should take care of him and not the government. If he’s past the early opt out period, does the IRS allow for a change of conscience later? It doesn’t seem that they do.

  12. Chris says

    I appreciate this discussion. I opted out after entering the ministry in my 40′s. By that time, I had reportedly worked enough quarters (minimum of 40) to be fully vested in social security. As a result, I receive statements that reflect what my post-retirement benefits will be. I am aligned with many things stated by Nathan. I don’t see it as a violation or contradiction to receive government assistance against earnings that I received through my earlier secular employment (when I was not privy to these issues/options), although I understand that I shouldn’t benefit from not paying in while in the ministry. The piece that most people leave out of this discussion is that pre-ministry contributions (if vested through at lest 40 quarters) qualify one to receive benefits.

  13. Bob says

    Morning Craig,
    I have a question about opting back into Social security. First, i should have never opted out, i was 21 and well…young. I recently looked into opting back in to ss, but noticed that Crown ministries says I will have to pay back all the years I missed, is this true? What if any penalty is there. I would think they want my money.
    Thanks

    • says

      Bob,
      According to my research and understanding (I’m not a legal professional so I can’t offer legal advice) there isn’t currently a way for you to opt back in.

      See this helpful article at Servant Solutions. Here’s a quote from that article:

      Some ministers who previously made an election for exemption have become aware that they made their decision based on erroneous information. As a result of their expressed desire to reenter the Social Security System, Congress made provision in the Tax Reform Act of 1986 for a brief “window of opportunity” to be opened to those persons to opt back into Social Security without having to pay the back taxes (SECA). Of course, no Social Security/Medicare coverage was to be retroactive for the years one was exempt from SECA tax. (Only earnings on which SECA tax was paid is included when one’s benefit is calculated.) This specific “window of opportunity” closed on April 15, 1988.

      Another “window of opportunity” to opt back into Social Security without having to pay the back taxes (SECA) was opened by the Work Incentives Improvement Act of 1999. This two-year window closed April 15, 2002.

      The Servant Solutions office is not aware of any formal provision that now exists to allow ministers to revoke previous exemptions and “opt back into” Social Security. If you are a minister who has opted out of Social Security based on erroneous information and wish now to participate, you probably should secure the services of professional legal and tax advisors to analyze your unique situation and determine if there is any course of action available to accomplish your desire.

      • Alicia says

        I am in a similar situation as Bob. Young and naive and not believing in retirement it sounded like a good idea, but being more mature I have to realize that sometimes our health doesn’t allow us the choice to choose whether we retire or not (especially as a missionary who sees the impacts life overseas has on workers). And kind of like you I didn’t really pay lots of attention to the fine print, but trusted those above me who suggested it was a good idea. If the form is all based on our beliefs it seems that if we have a change of beliefs we should be allowed to file that with the IRS as well. I opted out after this window mentioned above even existed. Will there be another window? How can we keep informed of its existence if it comes again? Is there really no way to say I’ve changed my beliefs and want to opt back in?

  14. Dan says

    I find it sad how quickly ministers get up on their integrity high horse without actually studying the law and looking at the facts first. Like many issues in our world, it is possible to agree to disagree and still worship with a brother or sister in Christ. Until it’s an issue that can clearly be defined as black/white, let’s avoid the high horse and discover the facts.

    I can’t add too much to what’s already been discussed but one question I’d like to add is what is the original intent of the law? The regulations defining opting out don’t help and I haven’t found any court cases that define it any further. If this law was only for Mennonites or other similar faiths, why was the IRS vague about who qualifies? Perhaps on purpose? It’s not uncommon for our government to give benefits to Christians. The IRS does it in various ways. USCIS provides expedited naturalization to missionaries.

    The IRS talks about making a conscientious objection that can’t be made based on someone’s general conscience. Are Christians using a “general conscience” or a Holy Spirit guided conscience? I wouldn’t say I have a “general conscience.” My Holy Spirit guided conscience tells me to be a good steward. SS has a negative rate of return for a person of my age right now. It’s a horrible investment. Could I opt out because of stewardship under a conscientious objection? Am I making that decision purely based on financial reasons? No. If I was, then I would be completely eliminating God from the decision and making a purely selfish decision.

    Why are there 2 separate ways to opt out? Conscientious objection or religious principles? Why 2? What’s the difference? A Mennonite would likely claim religious principles. Who is a conscientious objection for?

    Give to Caesar what is Caesars? Yes. Caesar didn’t have a legal way to opt out of SS.

  15. Bob says

    Dan, is this supposed to be a rebuke as if I sinned? I already confessed to being young and foolish. If that is not enough for you, I would rather not listen to you’re “high horse”.

Leave a Reply

Your email address will not be published. Required fields are marked *