Why Would the IRS Form 4361 Be Denied?

Church ministers, based on religious objections, are allowed an exemption from the Internal Revenue Service (IRS) from paying Social Security tax requirements. This in turn means such ministers will not receive Social Security benefits later in life. However, the IRS exemption processed with IRS Form 4361 is not automatic, and the wrong information submitted can result in denial.

Background

Church ministers normally pay Social Security taxes like anyone else who is employed and earns taxable income. Due to the nature of how a minister is employed within a church, the minister's income is frequently declared as self-employed earnings. As such, self-employment tax on income and for Social Security becomes due at tax time when income tax filings must be submitted (i.e., April 15th annually).

However, the IRS and the federal revenue tax code allow for a church minister exemption from Social Security taxes. The exemption is not automatically granted, and it must be based on religious objections to receiving Social Security benefits. To file for the exemption and document the related objections, the minister in question has to apply in writing on IRS Form 4361.

Critical Criteria: Objection Statement

Form 4361 asks for identification information, but it also includes fields for critical data that can make or break a request for a tax exemption. Particular attention needs to be paid to making sure the form identifies the applicant as a member of a religious order and, more importantly, has a specific conscientious objection to receiving government insurance normally provided by Social Security.

Critical Criteria: Sufficient Income

In addition, the applicant needs to show proof of at least two years of net self-employment income equaling more than $400 each year, while working as a church minister or a specified religious employment category. The document needs to be submitted with an original signature of the applicant certifying truthful statement under penalty of perjury.

Issues Causing Denial

The IRS will regularly deny Form 4361s if the initial criteria of the form are not met. Examples of denials reasons vary, but the most basic is that the applicant failed to sign the form before sending it. If the applicant won’t commit legally to the statements made, the IRS will not give anyone an exemption based on those statements.

Additionally, some ministers confuse just changing faiths as enough justification for a Form 4361. This is incorrect. The conscientious-objection statement needs to be filled out and included. A simple change of ordination or religious group is insufficient to meet IRS criteria.

Some denials occur because insufficient income was earned prior to the filing period or the statements made on the form used the wrong language.

Caveats

Even if a Form 4361 is approved, the applicant should be aware of the consequences prior to applying. Any self-employment taxes already due and that need to be paid should be until approval is actually received in writing. Overpayments can be refunded after the fact with an amended tax filing. Once an exemption is granted, the applicant cannot later go back as a minister and reverse the exemption unless Congress allows for a temporary exception period. Such short-time windows have been allowed in the past, but are now closed.

References

• New Minister: Should I Opt Out of Social Security?
• IRS: Form 4361
• IRS: Publication 517 (2009), Social Security and Other Information for Members of the Clergy and Religious Workers
• Crown Financial Ministries: Opting Out of Social Security
• U.S. Internal Revenue Service: IRS Memorandum-Minister Waiver Program