Page 38 | Church Law & Tax

Form 990: Does Your Church Need to File This IRS Form?

A comprehensive guide on whether churches must file Form 990, including exemption criteria and legislative updates.

Last Reviewed: January 2, 2025

Are churches required to file Form 990 with the federal government? Here’s a detailed guide to help churches understand their filing obligations.

Key Takeaways:

Churches and certain religious organizations are exempt from filing Form 990.
Specific criteria define which organizations qualify for the exemption.
Proposed legislative changes could alter filing requirements for churches.

Churches are generally not required to file Form 990 with the IRS. This exemption is granted under Section 6033 of the Internal Revenue Code, which outlines specific criteria for exempt organizations.

Here’s what church leaders need to know.

Who Is Exempt from Filing Form 990?

Section 6033 specifies organizations exempt from filing Form 990. These include:

Churches, conventions, or associations of churches, and interchurch organizations of local church units.
Integrated auxiliaries of a church, such as men’s or women’s organizations, religious schools, mission societies, or youth groups.
Schools below the college level affiliated with a church or religious order.
Mission societies affiliated with churches, if over half of their activities target foreign countries.
Exclusively religious activities or religious orders.
Religious or apostolic organizations described in Section 501(d) of the Code.
Exempt organizations with annual gross receipts typically below $25,000.

What Is Form 990?

Form 990 is an annual return required for most tax-exempt organizations. It includes 89 questions covering finances, services, and administration. While this form ensures transparency and accountability, many religious organizations are exempt from filing due to their unique status.

Legislative Developments to Watch

Efforts are ongoing in Washington to require all religious organizations, including churches, to file an annual Form 990. If enacted, this could impact reporting requirements significantly. Stay informed on legislative updates that could affect your church’s obligations.

Example: A small mission society that conducts over half its activities abroad and earns less than $25,000 annually qualifies for the exemption.

Practical Steps for Compliance

Confirm your organization’s exemption status under Section 6033.
Stay updated on potential legislative changes affecting Form 990 filing requirements.
Consult a tax advisor or legal professional for guidance tailored to your church.

FAQs About Form 990

Are all churches exempt from filing Form 990? Yes, under Section 6033, most churches and related organizations are exempt.
What happens if filing requirements change? Churches will need to adhere to new regulations. Stay informed of legislative updates.
Do small organizations qualify for exemption? Yes, organizations with annual gross receipts below $25,000 are generally exempt.
Why is Form 990 important? It ensures transparency and accountability for tax-exempt organizations, but churches are uniquely exempt.

To learn more about Form 990 and filing requirements, visit the IRS website or consult a legal expert specializing in nonprofit tax law.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Clergy Taxes: Should Ministers Revoke Their Social Security Exemption?

A guide for ministers considering whether to revoke their social security exemption based on the Tax Reform Act of 1986.

Last Reviewed: January 2, 2025

Many ministers previously opted out of social security due to financial advice, but should they reconsider? Here’s a guide to help clergy evaluate their clergy tax options.

Key Takeaways:

Ministers can revoke their social security exemption under specific conditions.
Eligibility for exemption is based on religious principles, not financial motives.
Ministers nearing retirement should weigh the benefits of revoking carefully.

Ministers who exempted themselves from social security for financial reasons may reconsider their decision under the provisions of the Tax Reform Act of 1986. Here’s what to know about revoking an exemption and the steps involved.

To qualify for a social security exemption, a minister must oppose receiving benefits on religious grounds, not for financial reasons. Congress created the opportunity to revoke exemptions for those who did not meet this criterion. If the initial exemption was improperly claimed, ministers have an ethical obligation to re-enter the system.

Steps to Revoke an Exemption

Ministers can revoke their social security exemption by filing a revised Form 2031 by the deadline. For the Tax Reform Act of 1986, this deadline was April 15, 1988. Though the specific deadline has passed, similar principles may apply to current circumstances, depending on updated legislation.

Important: Ministers will not face penalties for back taxes when revoking their exemption and do not need to justify their decision.

Considerations for Ministers Nearing Retirement

Ministers close to retirement should assess the practicality of revoking their exemption, as eligibility for social security benefits requires at least 10 years (40 quarters) of covered employment. Paying into the system shortly before retirement may result in limited or no benefits.

Example: A minister with fewer than 10 years of covered employment may find revocation financially unwise, as benefits are calculated using the 35 highest years of earnings.

Ministers with at least 10 years of secular employment retain their social security benefits based on those earnings. However, years of exempt wages as clergy will reduce the overall benefits calculation.

Practical Steps for Ministers Considering Revocation

Evaluate your eligibility and reasons for exemption.
Consult with a tax professional or legal advisor.
File Form 2031 by the applicable deadline.
Prepare to pay self-employment taxes for the year of revocation.

FAQs About Clergy Taxes

Can a minister revoke a social security exemption? Yes, by filing the appropriate form within the deadline set by legislation.
What is the eligibility for a social security exemption? Opposition to benefits must be based on religious principles, not financial concerns.
How does revocation affect retirement benefits? Ministers must work 10 or more years in covered employment to qualify for benefits.
Does secular employment impact social security for ministers? Yes, secular earnings count toward benefits, even if clergy income is exempt.

Ministers must weigh their options carefully, considering both their ethical obligations and financial implications. For more information, refer to the Social Security Administration or consult a legal expert specializing in clergy taxes.