Publication 517 |
2000 Tax Year |
Social Security Coverage
The services you perform in the exercise of your ministry are
covered by social security and Medicare under SECA. Your earnings for
these services are subject to self-employment tax (SE tax) unless one
of the following applies.
- You are a member of a religious order who has taken a vow of
poverty.
- You ask the Internal Revenue Service (IRS) for an exemption
from SE tax for your services and the IRS approves your request. See
Exemption From Self-Employment (SE) Tax, later.
- You are subject only to the social security laws of a
foreign country under the provisions of a social security agreement
between the United States and that country. For more information, see
Binational Social Security (Totalization) Agreements in
Publication 54,
Tax Guide for U.S. Citizens and Resident Aliens
Abroad.
Your earnings that are not from the exercise of your ministry may
be subject to social security tax under FICA or SECA according to the
rules that apply to taxpayers in general. See Qualified Services,
later.
Ministers
If you are a minister of a church, your earnings for the services
you perform in your capacity as a minister are subject to SE tax
unless you have requested and received an exemption. See
Exemption From Self-Employment (SE) Tax, later. These
earnings are subject to SE tax whether you are an employee of your
church or a self-employed person under the common law rules. For the
specific services covered, see Qualified Services, later.
Ministers Defined
Ministers are individuals who are duly ordained, commissioned, or
licensed by a religious body constituting a church or church
denomination. They are given the authority to conduct religious
worship, perform sacerdotal functions, and administer ordinances or
sacraments according to the prescribed tenets and practices of that
church or denomination.
If a church or denomination ordains some ministers and licenses or
commissions others, anyone licensed or commissioned must be able to
perform substantially all the religious functions of an ordained
minister to be treated as a minister for social security purposes.
Employment Status for Other Tax Purposes
Even though you are considered a self-employed individual in
performing your ministerial services for social security tax purposes,
you may be considered an employee for income tax or retirement plan
purposes. For income tax or retirement plan purposes, some of your
income may be considered self-employment income and other income may
be considered wages.
Common-law employee.
Under common law rules, you are considered either an employee or a
self-employed person depending on all the facts and circumstances.
Generally, you are an employee if your employer has the legal right to
control both what you do and how you do it, even if you have
considerable discretion and freedom of action. For more information
about the common-law rules, get Publication 15-A,
Employer's Supplemental Tax Guide.
If you are employed by a congregation for a salary, you are
generally a common-law employee and income from the exercise of your
ministry is considered wages for income tax purposes. However, amounts
received directly from members of the congregation, such as fees for
performing marriages, baptisms, or other personal services, are
considered self-employment income.
Example.
A church hires and pays you a salary to perform ministerial
services subject to its control. Under the common-law rules, you are
an employee of the church while performing those services.
Form SS-8.
If you are not certain whether you are an employee or a
self-employed person, you can get a determination from the IRS by
filing Form SS-8.
Members of Religious Orders
If you are a member of a religious order who has not
taken a vow of poverty, your earnings for qualified services you
performed as a member of the order are subject to SE tax. See
Qualified Services, later. This does not apply if you have
requested and received an exemption as discussed under Exemption
From Self-Employment (SE) Tax, later.
Vow of poverty.
If you are a member of a religious order who has taken a vow of
poverty, you are exempt from paying SE tax on your earnings
for qualified services (defined later) you perform as an agent of your
church or its agencies. For income tax purposes, the earnings are tax
free to you. Your earnings are considered the income of the religious
order.
Services covered under FICA at the election of the order.
Even if you have taken a vow of poverty, the services you perform
for your church or its agencies may be covered under social security.
Your services are covered if your order, or an autonomous subdivision
of the order, elects social security coverage for its current and
future vow-of-poverty members.
The order or subdivision elects coverage by filing Form
SS-16. It can elect coverage for certain vow-of-poverty members
for a retroactive period of up to 20 calendar quarters before the
quarter in which it files the certificate. If the election is made,
the order or subdivision pays both the employer's and employee's share
of the tax. You do not pay.
Services performed outside the order.
Even if you are a member of a religious order who has taken a vow
of poverty and is required to turn over to the order amounts you earn,
your earnings are subject to federal income tax withholding and
employment (FICA) tax if you:
- Work for an organization outside your religious community,
and
- Perform work that is not required by, or done on behalf of,
the order.
In this case, you are considered an employee of that outside
organization. You may, however, be able to take a charitable deduction
for the amount you turn over to the order. See Publication 526,
Charitable Contributions.
Lay employees.
Lay employees are generally covered by social security. But see
Election to Exclude Church Employees From FICA Coverage,
later, under Religious Workers.
Rulings.
Organizations and individuals may request rulings from the IRS on
whether they are religious orders, or members of a religious order,
for FICA tax, SE tax, and federal income tax withholding purposes. To
request a ruling, follow the procedures in Revenue Procedure
2000-1, which is published in Internal Revenue Bulletin
2000-1.
You can read this Revenue Procedure at most IRS offices or, if you
have a personal computer, visit the IRS on the Internet at
www.irs.gov and select Tax Info For You.
To subscribe to the Bulletin, you can order it on the Internet at
http://bookstore.gpo.
gov/irs. You can also write to:
Superintendent of Documents
U.S. Government Printing Office (GPO)
P.O. Box 371954
Pittsburgh, PA 15250-7954.
Christian Science
Practitioners and Readers
Your earnings from services you performed in your profession as a
Christian Science practitioner or reader are generally subject to SE
tax. However, you can request an exemption as discussed under
Exemption From Self-Employment (SE) Tax, later.
Practitioners.
Christian Science practitioners are members in good standing of the
Mother Church, The First Church of Christ Scientist, in Boston,
Massachusetts, who practice healing according to the teachings of
Christian Science. Christian Science practitioners are specifically
exempted from licensing by state laws.
Some Christian Science practitioners also are Christian Science
teachers or lecturers. Income from teaching or lecturing is considered
the same as income from their work as practitioners.
Readers.
Christian Science readers are considered the same as ordained,
commissioned, or licensed ministers.
Religious Workers (Church Employees)
If you are a religious worker (a church employee) and are not in
one of the classes already discussed, your wages are generally subject
to social security and Medicare tax (FICA) and not to SE tax. Some
exceptions are discussed next.
Table 2. The Self-Employment Tax Exemption Application and Approval Process
Election To Exclude Church Employees From FICA Coverage
Churches and qualified church-controlled organizations (church
organizations) that are opposed for religious reasons to the payment
of social security and Medicare taxes can elect to exclude their
employees from FICA coverage. If you are an employee of a church or
church organization that makes this election and pays you $108.28 or
more in wages, you must pay SE tax on those wages.
Churches and church organizations make this election by filing two
copies of Form 8274, Certification by Churches and Qualified
Church-Controlled Organizations Electing Exemption From Employer
Social Security and Medicare Taxes. For more information about
making this election, get Form 8274.
Election by Church Employees Who Are Opposed to Social
Security and Medicare
You may be able to choose to be exempt from social security and
Medicare taxes, including the SE tax, if you work for a church (or
church-controlled non-profit division) that does not pay the
employer's part of the social security tax on wages. You can make the
choice if you are a member of a religious sect or division opposed to
social security and Medicare. This exemption does not apply to your
service, if any, as a minister of a church or as a member of a
religious order.
You can make this choice by filing Form 4029. See Requesting
Exemption -- Form 4029, later, under Members of
Recognized Religious Sects.
U.S. Citizens, Resident
and Nonresident Aliens
To be covered under the SE tax provisions (SECA), individuals
generally must be citizens or resident aliens of the United States.
Nonresident aliens are not covered under SECA.
To determine your alien status, see Publication 519,
U.S. Tax
Guide for Aliens.
Residents of Puerto Rico, the Virgin Islands, Guam, the CNMI,
and American Samoa.
Residents of Puerto Rico, the Virgin Islands, Guam, the
Commonwealth of the Northern Mariana Islands, and American Samoa, who
are not U.S. citizens, are treated the same as citizens or resident
aliens of the United States for SE tax purposes. For information on
figuring the tax, see Figuring Net Earnings From Self-Employment
for SE Tax, later.
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