Publication 15a |
2001 Tax Year |
Chapter 4 Religious Exemptions
Special rules apply to the treatment of ministers for social
security purposes. An exemption from social security is available for
ministers and certain other religious workers and members of certain
recognized religious sects. For more information on getting an
exemption, see Pub. 517, Social Security and Other
Information for Members of the Clergy and Religious Workers.
Ministers.
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 and
sacraments according to the prescribed tenets and practices of that
religious organization.
A minister who performs services for you subject to your will and
control is your employee. The common-law rules discussed in sections 1
and 2 should be applied to determine whether a minister is your
employee or is self-employed. The earnings of a minister are not
subject to income, social security, and Medicare tax withholding. They
are subject to self-employment tax and income tax. You do not withhold
these taxes from wages earned by a minister. However, you may agree
with the minister to voluntarily withhold tax to cover the minister's
liability for self-employment tax and income tax.
Form W-2.
If your employee is an ordained minister, report all taxable
compensation as wages in box 1 on Form W-2. Include in this amount
expense allowances or reimbursements paid under a nonaccountable plan,
discussed in section 5 of Circular E. Do not include a parsonage
allowance (excludable housing allowance) in this amount. You may
report a parsonage or rental allowance (housing allowance), utilities
allowance, and the rental value of housing provided in a separate
statement or in box 14 on Form W-2. Do not show on Form W-2 or 941 any
amount as social security or Medicare wages, or any withholding for
social security or Medicare taxes. If you withheld tax from the
minister under a voluntary agreement, this amount should be shown in
box 2 on Form W-2 as Federal income tax withheld. For more information
on ministers, see Pub. 517.
Exemptions for ministers and others.
Certain ordained ministers, Christian Science practitioners, and
members of religious orders who have not taken a vow of poverty, who
are subject to self-employment tax, may apply to exempt their earnings
from the tax on religious grounds. The application must be based on
conscientious opposition to public insurance because of personal
religious considerations. The exemption applies only to qualified
services performed for the religious organization. See Rev. Proc.
91-20, 1991-1 C.B. 524, for guidelines to determine whether an
organization is a religious order or whether an individual is a member
of a religious order.
To apply for the exemption, the employee should file Form
4361, Application for Exemption From Self-Employment Tax for Use
by Ministers, Members of Religious Orders and Christian Science
Practitioners. See Pub. 517 for more information about Form 4361.
Members of recognized religious sects opposed to insurance.
If you belong to a recognized religious sect or a division of such
sect that is opposed to insurance, you may qualify for an exemption
from the self-employment tax. To qualify, you must be conscientiously
opposed to accepting the benefits of any public or private insurance
that makes payments because of death, disability, old age, or
retirement, or makes payments toward the cost of, or provides services
for, medical care (including social security and Medicare benefits).
If you buy a retirement annuity from an insurance company, you will
not be eligible for this exemption. Religious opposition based on the
teachings of the sect is the only legal basis for the exemption. In
addition, your religious sect (or division) must have existed since
December 31, 1950.
Self-employed.
If you are self-employed and a member of a recognized religious
sect opposed to insurance, you can apply for exemption by filing
Form 4029, Application for Exemption From Social Security
and Medicare Taxes and Waiver of Benefits, and waive all social
security benefits.
Employees.
The social security and Medicare tax exemption available to the
self-employed who are members of a recognized religious sect opposed
to insurance is also available to their employees who are members of
such a sect. This applies to partnerships only if each partner is a
member of the sect. This exemption for employees applies only if both
the employee and the employer are members of such a sect, and the
employer has an exemption. To get the exemption, the employee must
file Form 4029.
An employee of a church or church-controlled organization that is
exempt from social security and Medicare taxes can also apply for an
exemption on Form 4029.
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