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Church and Clergy Tax Developments in 2008: 2008 in Review
46 of the most important tax highlights.

46 of the most important tax highlights

Congress enacted additional tax legislation in 2008 that includes provisions of direct relevance to churches and church employees. Tax laws enacted in prior years also contain provisions that took effect in 2008 or 2009. In addition, a number of court decisions and IRS rulings provided clarification on a variety of important tax issues. Several of the most important changes and clarifications are summarized in this feature article.

Part 1-Clergy and Lay Church Employees

A. Miscellaneous Tax Law Changes

1. Revoking an exemption from Social Security

Will Congress give ministers another opportunity to revoke an exemption from Social Security? It does not seem likely, at least for now. In 2005 Congressman David Camp (R-MI) introduced a bill (H.R. 451) that would have allowed ministers a limited time to revoke an exemption from Social Security. The same opportunity has been granted three times by Congress over the past 30 years.

The current attempt gained no cosponsors and is now dead. No similar legislation has been introduced since 2005.

2. The Exemption of Ministers from Social Security-Case#1

Many ministers do not pay self-employment taxes because they believe they are exempt, even though they cannot find a copy of the Form 4361 they submitted to the IRS, or any other evidence that they are exempt. In some of these cases the minister in fact did submit a timely Form 4361, while in others the minister is relying on a vague recollection of something that never happened. What happens if such a minister is audited? How can the minister prove that a timely Form 4361 was filed? What if the minister cannot do so? Will self-employment taxes be owed?

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