Key point. Ministers always are self-employed for Social Security with respect to services performed in the exercise of ministry (with the exception of some government-employed chaplains). As a result, ministers pay the self-employment tax rather than the employee’s share of Social Security and Medicare taxes—even if they report their federal income taxes as employees.
A federal district court in New York ruled that a church did not act improperly in failing to withhold Social Security taxes from its pastor’s compensation.
A pastor was employed by a denominational agency (the “church”) for 20 years. During his employment, the church classified him as an employee and issued him annual W-2 forms, but it did not withhold FICA taxes (Social Security and Medicare) from his compensation.
In 2017, the pastor retired and the Social Security Administration informed ...