SS exemption for ministers

[TaxmannEA]

I was just asked that if a minister files for exemption from Social Security, does that affect eligibility for Medicaid for his family? I really don't have any idea.

[JohnH]

The Audit Techniques Guide for Clergy lumps SocSec, Medicare, and Medicaid into the same category when describing the exemption.  And since Medicaid is a part of SocSec, that would lead me to believe it affects the minister's eligibility. However, I could be wrong on that and I can't imagine the minster's decision would automatically affect his/her family.  Also, even ministers who have filed Form 4361 cannot exempt themselves entirely. Any non-ministerial income they receive is still subject to SocSec tax and they will be entitled to SocSec benefits upon reaching retirement age.

None of this addresses the fundamental question, which is that by filing Form 4361 the minister is saying he/she is opposed to any form of governmental assistance/insurance. It isn't a financial decision - it is supposed to be a decision based on principle and conviction.  So if the filing of the exemption is genuine, then the issue of requesting Medicaid assistance should never arise.

 

Interesting question, though.

 

 

Edited May 18, 2015 by JohnH

[JohnH]

I went back and re-read the 4361.  It actually states that the applicant objects to any form of government assistance for death, disability, old age, retirement, medical expenses, etc, (a list which just happens to include Social Security).  So that slams the door shut on Medicaid for the applicant with respect to the declaration.  And anyone who submits the form for financial reasons or any other reason is committing perjury. 

But as KC pointed out, that doesn't mean our government actually pays any attention to things like this when handing out the money.

http://www.irs.gov/pub/irs-pdf/f4361.pdf

 

 

 

Edited May 18, 2015 by JohnH

[JJStephens]

I think there may be more here than meets the eye. While it is entirely possible this individual wants to have it both ways (alas, many people, clergy and non, are constantly looking for ways to game the system for their personal financial gain) it is also possible there is another way of looking at it.

As you know, opting out only affects SECA tax payments (and associated benefits) on income related to performing clergy services. However, these clergy taxpayers must still pay into FICA/SECA on their secular earnings before, during and after their clergy service and are still entitled to receive SS benefits based on those secular earnings (assuming they have the requisite number of credits and meet other qualifying criteria). Further, the spouse may have paid in and therefore, might also have earned legitimate benefits.

It may be that this individual is merely asking, "If I opt out on my clergy earnings, will I still get the benefits that I previously earned ... or do I lose everything?" or perhaps, "I am bi-vocational and therefore am paying in now on my secular earnings. Will those benefits be forfeited if I opt out on my clergy income?" or maybe, "Will the benefits my spouse has earned be lost?" These are all entirely legitimate concerns.

Further, clergy taxpayers are no more tax experts than any of our other clients. They are simply looking to us for answers to the questions that bewilder them.  In other words, (s)he might not be trying to scam the system, (s)he may just be trying to get a handle on something that is pretty befuddling.

My primary gig is doing consulting work for churches and other religious non-profits. As a result, I do a ton of tax work with clergy (fwiw, I am one myself--I've been in pastoral ministry for more than 35 years). A comment I often hear is, "I am fundamentally opposed to receiving a government benefit for my work in the church, but at the same time, I don't want to lose those benefits that I previously earned before I entered the ministry." IMO that is a valid concern about an issue with which the person is not well-acquainted. Let's be honest--this topic (opting out) is not a particularly easy concept to understand. That's why we get to charge the big bucks to know it/explain it   With all my clients, clergy and non-clergy alike, my job is to make them aware of the facts and the implications of those facts in order to empower them to make an informed decision.

[Jack from Ohio]

My primary gig is doing consulting work for churches and other religious non-profits. As a result, I do a ton of tax work with clergy (fwiw, I am one myself--I've been in pastoral ministry for more than 35 years). A comment I often hear is, "I am fundamentally opposed to receiving a government benefit for my work in the church, but at the same time, I don't want to lose those benefits that I previously earned before I entered the ministry." IMO that is a valid concern about an issue with which the person is not well-acquainted. Let's be honest--this topic (opting out) is not a particularly easy concept to understand. That's why we get to charge the big bucks to know it/explain it   With all my clients, clergy and non-clergy alike, my job is to make them aware of the facts and the implications of those facts in order to empower them to make an informed decision.

​For a minister to use the term "fundamentally opposed to receiving a government benefit..." then to say  "I don't want to lose those benefits that I previously earned before I entered the ministry." smacks of hypocrisy to me.  Either you are FUNDAMENTALLY OPPOSED or you are not.   I guess some ministers have developed a different definition of fundamental than I was taught.

At the firm where I work part time, I witness this kind of situation dozens of times each year. 

This kind of attitude and actions fly directly in the face of scriptural teaching.  Example: Matthew 5:37 (NIV) Simply let your 'Yes' be 'Yes,' and your 'No,' 'No'; anything beyond this comes from the evil one. 

James 5:12 (NIV) Above all, my brothers, do not swear--not by heaven or by earth or by anything else. Let your "Yes" be yes, and your "No," no, or you will be condemned.

Rant over. 

[kcjenkins]

Jack, you cut off the important qualify phrase  "for my work in the church".      It is a valid point of view, IMHO.  In fact, the statement on the 4361 makes that distinction.  

 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, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.) 

[JohnH]

I think JJ laid it out very well. I personally take a different approach to many of my church and ministry-related financial decisions when compared to my business decisions, and I can understand how a person engaged in full-time or bivocational mministry might make similar distinctions. Over-simplification of life decisions and proof-texting really don't address some complex issues related to lliving under a secular government and at the same time applying one's faith in a meaningful way. 

Edited May 19, 2015 by JohnH

[Jack from Ohio]

I guess the term "fundamental" has a dynamic definition depending upon circumstances and whomever is using the term.

Either you are opposed or you are not.  That is expression of fundamental beliefs.

Edited May 19, 2015 by Jack from Ohio
Completed the thought.

[JJStephens]

Jack, with all due respect, I think you are still missing the point. I respect your opinion, but your view does not take into account a complete perspective of the law at question. I agree that 'yes' must be yes and 'no' must be no. That is not at issue. What is at issue is what we are saying yes or no to. It is not what you seem to think it is. If it were, I would agree with your point ... but it is not.

I would reiterate what others have said: when they opt out, Form 4361 does NOT require that clergy persons certify they are fundamentally opposed to receiving ANY/ALL guvment benefits. What they must certify is that they have a deeply held religious conviction (i.e., a fundamental belief) that it is not appropriate to receive a government benefit that is exclusively related to their service as a clergy person. The underlying rationale is that they do not think it is appropriate for the government to compensate them (even in an indirect way through a future insurance benefit) for their clergy service.

To recap, this has nothing to do with whether they can accept any government benefit. It is based exclusively on whether a clergy person can (in good conscience) accept a government benefit that is directly related to performing a clergy service. That is a huge distinction. And that is the ONLY thing they are opting out of.

Edited May 19, 2015 by JJStephens

[JohnH]

Well said.

[Jack from Ohio]

It is very apparent that fundamental beliefs have become watered down to meet any given situation.  Maybe I value my core spiritual beliefs much more than most. 

Such is the way our society is going.  There are no longer any absolutes for anything. 

However, my spiritual beliefs are filled with absolutes.  I am rapidly becoming a tiny minority.

[JJStephens]

It is very apparent that fundamental beliefs have become watered down to meet any given situation.  Maybe I value my core spiritual beliefs much more than most. 

Such is the way our society is going.  There are no longer any absolutes for anything. 

However, my spiritual beliefs are filled with absolutes.  I am rapidly becoming a tiny minority.

​Deep sigh. What we are talking about is not a fundamental spiritual belief. We are discussing the meaning of a section of tax law.

I do share your belief in absolutes and also share your concern that society is blurring those lines. I applaud you for your concern for and commitment to being absolutely faithful to immutable scriptural/spiritual truth--a commitment I share. But this ain't that!

In this instance, you are (IMO arbitrarily) placing a much higher burden on the taxpayer than does the IRS. The government does not ask for a declaration that the person is fundamentally opposed to accepting ANY government benefit. They ask only for a declaration that the person is fundamentally opposed to accepting a government sponsored benefit that is linked to their service as a clergy person. Benefits not linked to that service are NOT included in the declaration.

Here is the actual statement that the clergy person must certify on Form 4361 (highlights are mine):

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, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.)

I certify that as a duly ordained, commissioned, or licensed minister of a church or a member of a religious order not under a vow of poverty, I have informed the ordaining, commissioning, or licensing body of my church or order that I am conscientiously opposed to, or because of religious principles I am opposed to, the acceptance (for services I perform as a minister or as a member of a religious order) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care, including the benefits of any insurance system established by the Social Security Act.

I certify that I have never filed Form 2031 to revoke a previous exemption from social security coverage on earnings as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner.

I request to be exempted from paying self-employment tax on my earnings from services as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner, under section 1402(e) of the Internal Revenue Code. I understand that the exemption, if granted, will apply only to these earnings. Under penalties of perjury, I declare that I have examined this application and to the best of my knowledge and belief, it is true and correct.

There is nothing there about forever swearing off any and all public insurance benefits--only those that are directly associated with clergy service. Further, there is a clear acknowledgement that the applicant must continue to pay into the public insurance system (via FICA or SECA tax) on non-clergy earnings. The reason for that is that it is the clear intention of the underlying law that the exemption is restricted only to those benefits directly associated with clergy earnings/activities, and that secular earnings are still subject to tax, and that the person is not voluntarily forfeiting any benefits so-earned.

Well garsh. This has gotten to be a rather long thread and has deviated somewhat from its original intent. I do enjoy a spirited debate, but I don't think I have anything further useful to add. Therefore, I'll not be commenting on it any further.

 

[jklcpa]

​Deep sigh. What we are talking about is not a fundamental spiritual belief. We are discussing the meaning of a section of tax law. .... This has gotten to be a rather long thread and has deviated somewhat from its original intent.

.

Thank you, Jerry.

Edited May 19, 2015 by jklcpa
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[kcjenkins]

Jerry, you said it well.  Enough, I think.  We've certainly covered the original question that Taxman asked.  So I'm going to close the thread.