While most ministers are employees for federal income tax reporting purposes, the tax code treats them as self-employed for Social Security with respect to services they perform in the exercise of their ministry. This means that ministers are not subject to the employee’s share of Social Security and Medicare taxes (i.e., FICA taxes) even though they report their income taxes as employees and receive a Form W-2 from their church. Rather, they pay the self-employment tax (SECA).
Ministers who work after they retire must continue to pay SECA on their ministerial income and wages—unless they exempted themselves from self-employment tax as a minister and they are employed in a ministerial capacity.
Requirements for a SECA exemption
If ministers meet several requirements, they may exempt themselves from self-employment taxes with respect to their ministerial earnings. Among other things, the exemption application (Form 4361) must be submitted to the IRS within a limited time period. The deadline is the due date of the federal tax return for the second year in which a minister has net earnings from self-employment of $400 or more, any part of which comes from ministerial services.