Publication 517 - Social Security And Other Information For Members Of The Clergy And Religious Workers - 2011 Page 7
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30from their share of FICA taxes on wages paid by
for services you performed as a minister, a
income tax purposes under the foreign earned
the employer to the employee.
member of a religious order who has not taken a
income exclusion. The United States does not
vow of poverty, or a Christian Science practi-
have a social security agreement with Mexico,
A partnership in which each partner holds a
tioner or reader. Then, subtract your allowable
so Mr. Jones is subject to U.S. SE tax and must
religious exemption from social security and
business deductions and multiply the difference
include $35,000 when figuring net earnings from
Medicare is an employer for this purpose.
by 92.35% (.9235). Use Schedule SE (Form
self-employment.
If the employer’s application is ap-
1040) to figure your net earnings and SE tax.
TIP
proved, the exemption will apply only to
Specified U.S. possessions. The exclusion
If you are an employee of a church that
FICA taxes on wages paid to employ-
from gross income for amounts derived from
elected to exclude you from FICA coverage,
ees who also received an approval of identical
American Samoa or Puerto Rico does not apply
figure net earnings by multiplying your church
applications.
i n
c o m p u t i n g
n e t
e a r n i n g s
f r o m
wages shown on Form W-2 by 92.35% (.9235).
self-employment. Also see
Residents of Puerto
Information for employers. If you have an
Do not reduce your wages by any business
Rico, the U.S. Virgin Islands, Guam, the CNMI,
approved Form 4029 and you have an em-
deductions when making this computation. Use
and American
Samoa, earlier, under U.S. Citi-
ployee who has an approved Form 4029, do not
Schedule SE (Form 1040), Section B, to figure
zens and Resident and Nonresident Aliens.
report wages you paid to the employee as social
your net earnings and SE tax.
security and Medicare wages.
Amounts not included in gross income. Do
If you have an approved exemption, or
If you have an employee who does not have
!
not include the following amounts in gross in-
you are automatically exempt, do not
an approved Form 4029, you must withhold the
come when figuring your net earnings from
include the income or deductions from
CAUTION
employee’s share of social security and Medi-
self-employment.
ministerial services in figuring your net earnings
care taxes and pay the employer’s share.
from self-employment.
•
Offerings that others made to the church.
Form W-2. When preparing a Form W-2 for
Amounts included in gross income. To fig-
•
Contributions by your church to a
an employee with an approved Form 4029,
ure your net earnings from self-employment (on
tax-sheltered annuity plan set up for you,
enter “Form 4029” in box 14, “Other.” Do not
Schedule SE (Form 1040)), include in gross
including any salary reduction contribu-
make any entries in boxes 3, 4, 5, or 6.
income:
tions (elective deferrals) that are not in-
Forms 941, 943, and 944. If both you and
cluded in your gross income.
1. Salaries and fees for your
ministerial serv-
your employee have received approved Forms
ices
(discussed earlier),
•
Pension payments or retirement al-
4029, do not include these exempt wages on the
lowances you receive for your past minis-
2. Offerings you receive for marriages, bap-
following forms. Instead, follow the instructions
terial services.
tisms, funerals, masses, etc.,
given below.
•
•
The rental value of a parsonage or a par-
3. The value of meals and lodging provided
Form 941, Employer’s QUARTERLY Fed-
sonage allowance provided to you after
to you, your spouse, and your dependents
eral Tax Return: check the box on line 4
you retire.
for your employer’s convenience,
and enter “Form 4029” in the empty space
below the check box.
4. The fair rental value of a parsonage pro-
Allowable deductions. When figuring your
•
vided to you (including the cost of utilities
Form 943, Employer’s Annual Federal Tax
net earnings from self-employment, deduct all
that are furnished) and the rental allow-
Return for Agricultural Employees: enter
your nonemployee ministerial expenses. These
ance (including an amount for payment of
“Form 4029” to the right of the wage entry
are ministerial expenses you incurred while not
utilities) paid to you, and
spaces on lines 2 and 4.
working as a common-law employee of the
•
5. Any amount a church pays toward your
Form 944, Employer’s ANNUAL Federal
church. They include expenses incurred in per-
income tax or SE tax, other than withhold-
Tax Return: check the box on line 3 and
forming marriages and baptisms, and in deliver-
ing the amount from your salary. This
enter “Form 4029” in the empty space be-
ing speeches. Deduct these expenses on
amount is also subject to income tax.
low the check box.
Schedule C or C-EZ (Form 1040), and carry the
net amount to line 2 of Schedule SE (Form
For the income tax treatment of items (2) and
Effective date. An approved exemption
1040), Section A or B.
(4), see
Income Tax: Income and
Expenses,
from FICA becomes effective on the first day of
Wages earned as a
common-law employee
later.
the first calendar quarter after the quarter in
(explained earlier) of a church are generally sub-
which Form 4029 is filed. The exemption will end
Example. Pastor Roger Adams receives an
ject to self-employment tax unless an exemption
on the last day of the calendar quarter before the
is requested, as discussed earlier under
Exemp-
annual salary of $39,000 as a full-time minister.
quarter in which the employer, employee, sect,
tion From Self-Employment (SE)
Tax. Subtract
The $39,000 includes $5,000 that is designated
or division fails to meet the requirements.
any allowable expenses, including un-
as a rental allowance to pay utilities. His church
reimbursed employee business expenses, from
owns a parsonage that has a fair rental value of
those wages, include the net amount on line 2 of
$12,000 per year. Pastor Adams is given the use
Schedule SE (Form 1040), Section A or B, and
of the parsonage. He is not exempt from SE tax.
Self-Employment Tax:
attach an explanation. Do not complete Sched-
He must include $51,000 ($39,000 plus
ule C or C-EZ (Form 1040). However, for income
$12,000) when figuring his net earnings for SE
Figuring Net Earnings
tax purposes, the expenses are allowed only as
tax purposes.
an itemized deduction on Schedule A (Form
The results would be the same if, instead of
There are two methods for figuring your net
1040) if they exceed 2% of adjusted gross in-
the use of the parsonage and receipt of the
earnings from self-employment as a member of
come.
rental allowance for utilities, Pastor Adams had
the clergy or a religious worker.
received an annual salary of $51,000 of which
Note. You can no longer deduct the amount
•
$17,000 ($5,000 plus $12,000) per year was
Regular method.
of your self-employed health insurance deduc-
designated as a rental allowance.
•
Nonfarm optional method.
tion (Form 1040, line 29) in figuring your SE tax.
Overseas duty. Your net earnings from
However, you can still take this deduction on
self-employment are determined without any
Form 1040, line 29. See the Form 1040, line 29
You may find
Worksheets 1 through 4
foreign earned income exclusion or the foreign
instructions.
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helpful in figuring your net earnings
housing exclusion or deduction if you are a U.S.
from self-employment. Blank work-
citizen or resident alien serving abroad and liv-
Employee reimbursement arrangements. If
sheets are in the back of this publication, after
ing in a foreign country.
you received an advance, allowance, or reim-
the
Comprehensive
Example.
bursement for your employee expenses, how
For information on excluding foreign earned
you report this amount and your employee ex-
income or the foreign housing amount, see Pub-
Regular Method
penses depends on whether the reimbursement
lication 54.
was paid to you under an accountable plan or a
Most people use the regular method. Under this
Example. Paul Jones was the minister of a
nonaccountable plan. If you are not sure if you
method, figure your net earnings from
U.S. church in Mexico. He earned $35,000 in
are reimbursed from an accountable plan or a
self-employment by totaling your gross income
that position and was able to exclude it all for
nonaccountable plan, ask your employer.
Publication 517 (2011)
Page 7
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