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Minister wants to opt back in


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#1 HV Ken

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Posted 16 April 2011 - 01:14 PM

Minister tax client who has opted-out of Social Security for several years, now realizes she wants to opt back in. Prior to being a minister, she did have a traditional job so she has money paid into the system, but apparantly she needs "7 more credits".

Anyone have an idea where to look to find out the specifics on the process to opt back in?
@MAMalody: Is this something you have any experience in?

#2 JohnH

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Posted 16 April 2011 - 01:29 PM

Maybe Mike has a different answer, but I don't think it's possible. There were a couple of opportunities (with the last one expiring in 2002) for a minister to opt back in, but both had very narrow windows of time. The decision to opt out is based on theological reasons - being morally oppsed to accepting public assistance of any kind - rather than financial reasons. So I'm fairly certain that IRS and SSA consider it to be an irrevocable election.

#3 jainen

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Posted 16 April 2011 - 01:45 PM

>> she needs "7 more credits"<<

It's hard not to be cynical about such hypocrisy. The exemption is supposed to be for clergy who are conscientiously opposed to public insurance benefits, not to paying taxes. Oh, I shouldn't say that. Maybe she just had an epiphany. Advancing age will do that.

Well, Congress has from time to time allowed the election to be revoked, but the last time was eleven years ago. Details are in Pub 517.

#4 MAMalody

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Posted 16 April 2011 - 01:54 PM

JohnH is correct. The decision to opt out is not revocable.

I have never seen this done, however, an argument could be made that the opt out was done on a "misunderstanding of the criteria," that the minister does NOT have a theological objection. Essentially that is what the prior windows to opt back in were for..so there is a precedent for forgiveness. You might try that in a letter. If granted, and the odds are very slim, you could be liable for all back taxes...then there are statute issues...potential fraud issues, questions on why you didn't exercise the 2002 option, etc.

The bottom line is, as it stands, they are out. Option: get a part-time job for the next couple of years to earn the remaining 7 credits. Since medicare is more the issue that SS, that could be a good idea. Just some rambling thoughts.

#5 jainen

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Posted 16 April 2011 - 02:13 PM

>> get a part-time job for the next couple of years to earn the remaining 7 credits<<

Of course that's the answer! Obviously since she no longer believes in the tenets of her faith, she will no longer be serving as a minister anyway....

#6 HV Ken

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Posted 16 April 2011 - 06:38 PM

Thanks all for the comments. I think I chose a bad choice of terms - by opting in, what I meant was going back to work with withholding outside the church to get her final credits.

Two questions:
1) Can the church pay her on a W2 with withholding this year?

2) Can she take a second non-church job and receive both a W2 from the church with the opt out and also a W2 from a part time job with withholding?

Thanks!

#7 kcjenkins

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Posted 16 April 2011 - 09:51 PM

1) NO
2) Yes

#8 Lion EA

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Posted 16 April 2011 - 11:43 PM

The church should issue her a W-2, and they can withhold income taxes at the minister's request. The church can NOT withhold FICA/Medicare. If the minister is subject to self-employment tax, she will report it on her return.



#9 jainen

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Posted 17 April 2011 - 09:27 AM

>>The church can NOT withhold FICA/Medicare.<<

This only applies to her work as a minister. Unless the church itself has elected out, it deducts Social Security on other employees such as teachers, office staff, and community organizers. Often their work is similar to the clergy, so maybe she can come up with a plan. I still think it is dirty, though.

#10 Lion EA

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Posted 17 April 2011 - 09:39 AM

True, I should have included on the minister's wages after The church can NOT withhold FICA/Medicare, but didn't since this thread is about the minister and it was late at night and my very new, very expensive Dell that was dead all of March is dying again. Good morning!

#11 JohnH

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Posted 17 April 2011 - 02:56 PM

I think we've gotten hung up on the "opt back in" phraseology, when in fact that isn't what's taking place. She has opted out with respect to her clergy income, but she has no ability to opt out with respect to her non-clergy income. There simply isn't a choice here.

So as Mike pointed out, if she performs services in a second job or a different job, she automatically receives SocSec income and the accompanying credits. She just can't have her church change the way it pays her - I think that clearly crosses the line Jainen is referring to.

Whether it's right or wrong to work a job which qualifies her for SocSec benefits ( or whether she accepts them even if forced to pay for them) since she initially objected to SocSec benefits on theological principle, I suppose she will just have to reconcile that issue between herself and her Boss at the appropriate time.

#12 HV Ken

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Posted 18 April 2011 - 05:53 AM

1) NO
2) Yes


Thanks - that confirms the conclusion I reached!

#13 kcjenkins

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Posted 18 April 2011 - 11:07 AM

Since the tax code has long permitted the ministry to opt out ON CHURCH INCOME ONLY, it is not a violation of the principle of not accepting payments from SSA for THOSE EARNINGS for her to accept SS on other income, since she had no choice but to contribute on those wages. What would be wrong would be to try to now include church wages as SS covered wages.




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