Administrative Assistance

It is possible for a Minister of the Gospel, by filing an IRS Form 4361 in a timely manner, to exempt himself from participating in the Social Security System.  There are, however, several serious aspects to be aware of, and seriously consider regarding this decision.   This is a highly personal decision, and we will attempt to give you the facts, as well as our personal opinion.

This decision is solely in regards to “Ministerial Income.”  Any income from secular employment continues to be subject to the Social Security tax. 

This decision is not to be based on your economic opinion (eg: I can do better with my money elsewhere).  Rather, you must be conscientiously opposed to receiving funds from the government for yourself, your wife, your children, and Medicare or Social Security at retirement age.  Over the years, we have met several Ministers who are at the end of their “earning years,” who elected out of the system, and now, because they failed to provide for their retirement years, they have nowhere to live, and nothing to live on.

Realize too, that in the event of serious injury, or death, there will be no funds available to you or your wife, to care for your children, and that is a serious consideration. 

NOTE:  If a Minister elects to exempt, it would be wisdom to procure life insurance on himself, in the amount equal to, or more than five years of his normal income.  He should also seek counsel regarding investment, estate planning, and income replacement.

If you do choose to file for exemption, be aware that every member of the US Military have the same privilege.  As does as the Satanic ‘priest’ of Wicca; the Muslim Imam; and the Jewish Rabbi.  Do not feel like you should have to hide the fact that you did it.

IS IT POSSIBLE TO HAVE A “CLEAR CONSCIENCE” and choose to exempt from Social Security?
The author’s viewpoint:  I have observed the rapid, and ever increasing, encroachment of government into the personal affairs of it’s citizens over many years.  In a Ministers conference in 1995 I said, that it would not be long before the preaching against the sin of homosexuality will be a prosecutable offense.  Today it is a ‘hate crime,’ if done in the state of California.  More about that later.

Having said that, many have found it possible to file for exemption with a clear conscience, and have taken responsible steps to provide for their families in the event of personal economic disaster.  See the following letter, written by an E. A., Ward Correll.

“Whereas it is true that if a minister has made the election on solely an economic basis, that the election was incorrectly made.  I do believe however that ‘grounds’ for a correct choice do exist.  If you have followed the increase of litigation over the last few decades, you are aware of the warfare that is occurring between the church and ‘governmental agencies.’  One point that has become clear, is that if you accept financial aid from the government, you also accept their controls and guidelines.  This is where we can make a conscience choice.  We can say, ‘No… we do not want any strings attached to our ministry.  We do not want at any time some one to tell us what we can or cannot preach.’  To say that the government would never use such a point to leverage their agenda is simplistic.  We can object to receiving money from the government.  To file form 4361 does not mean that you would be disqualified from receiving social security from other employment, where the government gave no such option.”
Edward L. Correll, Enrolled Agent
Ministry Services
Maywood Park, OR
503-957-8016.

QUALIFICATIONS FOR A MINISTER TO EXEMPT FROM SECA 
He must first determine that he is in fact eligible to consider exemption.  Consider the following five factors:

1) Is he Ordained, Commissioned or Licensed, having authority to perform the Sacraments (To Marry and Bury)?
2) Does he (in fact) administer the Sacraments?
3) Does he conduct “Religious” worship?  (preparation and ministering the Word of God).
4) Does he have management responsibilities in the Church or Denomination?
5) Is he considered to be a Religious Leader by the Church or the parent Denomination?

 Must the minister actually do all of these things?  The IRS has insisted that all five points must be met.  The tax court, however, has said that the minister must minimally meet the first, and then at least two of the remaining four factors.  There is certainly great disagreement between them. 
 
MOST FREQUENTLY ASKED QUESTIONS:
1.     Does the Minister lose the credits, and dollars that have been paid into his account in the past?
  NO!  The exemption is only applicable to ministerial income, it does not affect what he has paid in prior years. 
2.    Can he retrieve the Self  Employment taxes already paid on Ministerial income during the two year window? 
  YES, by timely filing form 1040X, he can retrieve those dollars.  He should do so quickly, as the allowed time frame is quite short.
3.   If the Minister continues to earn moneys outside of the ministry is the secular income taxable? 
  YES, and his credits will continue to accumulate, while his ministerial income would be untaxed. 
4. If the two year “window” is past can a Minister be Ordained again, and then file the 4361 Form? 
Until recently, the answer was NO.  They have always said it is the date of the first Ordination (Commissioning or Licensing) that was considered.  However, if it is a Re-ordination, and the Minister has had a change of heart regarding his conviction of exemption, he now can do so.  There is, in effect, a new ‘two year window.’  For more information on this subject, contact Ward Correll, as he has helped several Ministers who were re-Ordained, to successfully file and obtain their exemption.
5.  Can I, in good conscience, file the Form 4361, considering the conditions set forth in #1?
This is the most important question of all.  Too often, the decision to file has been made on the basis of an economic consideration, and that is not an allowable basis.  The only basis being “conscientiously opposed to the acceptance of any public insurance funds ......” 

Read the form, pray, and consider the above, including the letter by Rev. Ward Correll, E. A

WHAT ARE THE “STEPS” OF FILING FOR EXEMPTION FROM SECA
1.  The Minister must read and carefully consider the provisions for exemption as presented in section 7 of the IRS Form 4361.  Can he agree that he is “conscientiously opposed to the acceptance of any public insurance funds?”  Not opposed to paying, but receiving financial assistance.  If the minister signs this form, he is saying that he is opposed to financial aid of any sort from the Government for himself, his wife and his children in the event of an early death, or if he is incapacitated.  If so, the minister can sign and file IRS Form 4361.
2.  He must file IRS Form 4361 in a timely fashion.  The end of the “window” of opportunity, is when the minister has filed his tax return after the second year (need not be concurrent) of self employment, having earnings of $400.00 or more, with any part of it earned from ministerial activities. *   He could be Ordained for 20 years, and then begin earning income from the Ministry – it is at that point the two year “Window” begins.
3.  He must write a letter to his ordaining organization, informing them of his decision and election to file IRS Form 4361. 
He would then mail, 1. A signed Form 4361, with 2. A copy of the aforementioned letter, and 3. The legal name, address, and FEIN, [employer identification number] of the church or denomination that ordained, commissioned, or licensed you;  and 4. A copy of the church’s “Exemption Ruling” letter [if they have a letter], to the IRS,.. *
4.  The IRS will send a letter of inquiry to the Minister, to ask if “He truly understands the provision of exemption.”
*  When the Minister files the IRS Form 4361, he is asked to attach a copy of his ordaining organization’s “Exemption Ruling Letter,” to his application.  If the organization does not have such a letter, (they are not required to have one, see Chapter 3 – 5, of The Church Administration “HOW TO” Manual for more information), the applicant may have to file additional Forms, to prove that the ordaining organization is indeed a legitimate, 501 (c)(3) Church.  Also see:  http://www.admin-assist.com/blog_detail/1_What_is_501_c_3

NOTE:
1)   It would be wise to mail  the above Packet to the IRS “Certified Mail, Return Receipt Requested.”  Create a correspondence file regarding your application.  If they never respond, and in subsequent years you were audited, your well maintained file, will likely win your audit case. 
2)   The form is normally returned within 6 to 18 months, with a signature and date of approval on the Form you send in.   Upon receipt of the approved Form, the Minister should make several copies, and keep them in various locations.  Should he ever be audited, he must be able to produce the Form 4361 as proof that he did elect to exempt.

REGARDING “OPTING OUT” - TWO PERSONAL COMMENTS:
•  Some would say, “How can you in all honesty say you are opposed?”  To that I respond: “The further this nation goes, as does Europe - where Christianity is actually being legislated against, the more I think we will shortly see the day when we will be denied our pittance of “Social Security” unless we preach a state mandated gospel.  Already in California, effective November of 2004 when SB 1234 legislation was passed, it is now possible to be sued and held liable in the Civil Court by anyone in the audience who “Perceives/believes” he is being preached against [as regards to his/her choice of lifestyle eg: homosexuality, transgender etc. etc.].  The author of this manual has chosen to “Opt Out” of the social security system, and choose to “Look to his God for supply, shelter and sustenance, for himself and his family, as opposed to counting on the state.”
Question:  How long will it be before our “Big Brother” government will announce something like: “Anyone persisting in speaking out against homosexuality, or against cohabiting couples having sex outside the boundaries of marriage, we will deem you to be ineligible to receive either your Social Security retirement or the benefits of Medicare?”

•  We challenge you  – DO NOT EAT YOUR “SEED.”  Far too many ministers have opted out over the years, then suddenly – they are 65 years old and have not put anything aside in preparation for retirement.  To be eligible for Social Security and/or Medicare at age 65, [this is an increasingly later threshold], you must have worked and contributed to the system for 10 years [40 quarters]. 
DO INVEST those funds [your 15.3% that would have been paid into the system] in some tangible, thoughtful way.  Hopefully you will have purchased your home, made extra payments on the mortgage, bought some Term Life Insurance, and have faithfully put funds away in anticipation of your “retirement” years.  If nothing else, buy some gold coins and bury them in the cabbage patch for goodness sake – BUT PLEASE DO SOMETHING with the money – Do not eat your seed!  Please - be responsible.

To order any IRS Form – call 1-800/tax form (1-800-829-3676).    They will mail any Form to you.
To download any Tax Form off the web  -  www.irs.gov   You can order any Form by number.

 If this discourse is of interest to you, please see Chapter 10 in  "The Church Administration 'How To' Manual" for more specific information.  There are Worksheets and Forms at the end of the chapter to enable you to maximize Housing Allowance, and minimize personal income taxes.  A Disc is included with the purchase of this manual, with the Worksheets and Forms.  This Manual, endorsed by three CPA's, an EA and two attorneys, was updated again in January, 2010, for the 11th time, since its original publication in 1991.

The above information is provided as a service to the Body of Christ by ADMINISTRATIVE ASSISTANCE – Rev. Don L. Buckel - Director. 8419 Vista del Cajon Pl. Lakeside, CA. 92040  don@admin-assist.com. Please feel free to call us at 619/443-5221. Please allow for West coast time zones, and call after 8:00AM PST