Revoking an Exemption from Social Security

We have noted in previous issues of this newsletter that ministers who opted out of

We have noted in previous issues of this newsletter that ministers who opted out of social security have been given a limited opportunity to revoke their exemption. The IRS has released the Form 2031 that ministers may use to revoke an exemption. Ministers wanting to revoke an exemption from social security can obtain a copy of Form 2031 by calling the IRS toll-free forms hotline at 1-800-TAX-FORM, or by downloading a copy from the IRS website (www.irs.gov).

Remember that ministers who have opted out of social security will have until April 15, 2002 to revoke their exemption. Ministers who revoke their exemption will have to elect, on Form 2031, to begin coverage as of either January 1, 2000 or January 1, 2001. In order to minimize or avoid paying "back taxes," ministers wanting to revoke an exemption should file the revocation form as follows:

Complete and return the Form 2031 immediately, and elect to begin coverage as of January 1, 2000. The form must be accompanied by a check in the amount of estimated self-employment taxes for the first two quarters of year 2000.

Key point. If you wait until on or after September 15, 2000 (but before January 15, 2001) to file the form, and elect to begin coverage on January 1, 2000, you will need to enclose a check in the amount of estimated self-employment taxes for the first three quarters of 2000. If you wait until on or after January 15, 2001 to file the form, and elect to begin coverage on January 1, 2000, you will need to enclose a check in the amount of estimated self-employment taxes for all four quarters of 2000.

Key point. Some ministers who are nearing retirement will want to elect to begin coverage on January 1, 2000 in order to accumulate four quarters of coverage for the year. In general, it takes forty quarters of coverage to be "permanently insured" for social security and Medicare benefits.

At anytime in the year 2000, and elect to begin coverage on January 1, 2001. This will avoid any liability for back taxes. Ministers will pay self-employment taxes along with their quarterly installments of estimated income taxes on April 15, June 15, and September 15 of year 2001, and January 15 of 2002.

For more information, see the feature article entitled "Revoking an Exemption from Social Security" in the July-August 1999 issue of this newsletter.

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

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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