Anybody ordained claiming exempt?

Discussion in 'Money Talk$' started by dan e., Aug 7, 2008.

  1. dan e.

    dan e.
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    Question for all of you ordained folk, as I am about to be one myself in October.

    My understanding is that as an ordained minister you may fill out a form and be exempt from being taxed on your income for social security....stating something to the effect of due to religious convictions you aren't going to give your money to trust the gvmt. for your future.

    Does anyone currently do this? Anyone opposed? Advantages/disadvantages? Advice?

    Thanks!
     
  2. rbell

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    The form is irrevocable. Once you "opt out," you cannot opt back in.

    This exemption is based purely on religious convictions. I oppose Social Security because it is a Ponzi scheme that has been used by our Congress to buy themselves power and make the citizenry dependent. If you or I tried that junk, we'd go to jail...but the government makes money doing it.
    However, I cannot in good conscience say that "God doesn't want me accepting SS." Thus, it would be dishonest for me to claim said exemption. If you must do it...be sure it because it has a truly and singluarly religious reason, and not just that you think the government is wasteful.

    Finally, (and admittedly anecdotally) I know three people personally who have "opted out." All three have been audited by the IRS...two of them multiple times (all audits have come out cleanly, to my knowledge). If you "opt out," I believe it is a "red flag" for IRS audits, so get ready.
     
  3. dan e.

    dan e.
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    Thanks for the thoughts to consider. I appreciate it.
     
  4. securityofficer2008

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    There are ups and downs to opting out of Social Security. If you do not opt out then you must pay the entire 15.3% of Social Security. When you are employed by an employer you pay 7.65% out of your paycheck and they pay the other 7.65%. If you are self employed (for Social Security purposes, and ministers are) you have to pay the whole 15.3% of Social Security tax. If you caim exemption from Social Security Tax you have to notify the church that ordained you within two years of your ordination. You must tell them that you want to be exempt from this. The church that ordains you must be a 501 C3 organization. You must file form 4361 with the IRS. Then you must wait for IRS notification for it to be valid. There are a few steps that you must go through, but can you truely say that it is a religious conviction? This is where the rubber meets the road. If you exempt yourself from Social Security and something happens to you later in life...the government will not pay for it or help you pay for it.

    I hope this helps!
     
  5. StefanM

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    Remember..it's not just SS that you opt out of. You also opt out of Medicare.
     
  6. Pastor_Bob

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    I opted out in '97. I already had enough quarters to qualify for SS benefits. Should I die prematurely, my wife will still be able to draw benefits. Only ministry related income is exempt from this tax. Any secular employment is still subject. For example, if you have to work a second job, it will be taxed.
     
  7. StefanM

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    Are you going to refuse the SS benefits you earned?

    And, if you had a religious objection to the system, why do you have any intention to use the system to support your wife, in case of your death?
     
  8. Pastor_Bob

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    I do not have a religious objection aganist the system. I simply opted out to make it easier for the church payroll system. And, yes, I plan to recover the funds that I put in for the first 20 years.
     
  9. StefanM

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    Did you have a religious objection at the time? If not, then how could you opt out without lying?
     
  10. SBCPreacher

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    There's the reason I've stayed in!
     
  11. rbell

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    My understanding is that your opting out is not valid. This is supposed to be on "religious grounds only."
     
  12. dan e.

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    I guess otherwise EVERYONE, ordained or not, should have the option to opt out.
     
  13. dan e.

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    Okay, so next question. Again, this is for the ordained.

    I think the tax is around 15%. Do you just budget this, set it aside, and pay it when you file? Or do you write a check monthly? Quarterly?
     
  14. Pastor_Bob

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    The form I filled out had no such language in it.
    The exemption is for ordained ministers and applies only to ministry related income. It has nothing to do with objecting.
     
  15. StefanM

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    You can do it in a few ways, depending on how things work out.

    1) If your church has a payroll for which they must withhold income tax (for non-ministerial employees), it is often easy for you to request that they withhold the funds, which will be reflected on your W-2 at the end of the year. I do this now, as it minimizes paperwork on my end.

    2) If your tax owed is small, then you can sometimes just pay it with your tax return.

    3) If you make enough money that you would face penalties if you wait until the end of the year (it's not really that much, so most would fall here), you will need to file quarterly estimated tax payments, according to the IRS schedule.

    4) If you are bivocational, you can voluntarily withhold additional funds from your secular paycheck to cover your self-employment and/or income tax.

    Remember, our tax system is pay-as-you-go, so you must be careful to avoid interest and penalties that can pile up if you wait to pay until you file your 1040.
     
  16. dan e.

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    My situation will probably fall under #2. I am being sent from my local church to Brazil, am being ordained in Oct., and will be living off what I can raise. I am now raising support from certain local churches and families, but my sending church is handling all of the incoming money. So...the money that will count as my income is actually money written out to the church, but being itemized under my family's ministry, and they will deposit the money in my account.
     
  17. Pastor_Bob

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    The only objection is to earnings from the ministry. I am opposed to the government taxing that income. But it is not a blanket objection to the system. ​



     
    #17 Pastor_Bob, Aug 8, 2008
    Last edited by a moderator: Aug 8, 2008
  18. StefanM

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    Obviously, as a non-professional, my advice here should be taken with a grain of salt, but in this case, I have no basis upon which to comment. I would consult a tax professional.
     
  19. tinytim

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    The Earned income Credit covers what I end up owing, and then some...

    But in a few yrs when my teens grow up, I will have to figure out something then.
     
  20. dan e.

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    Yes, I understand that. My wife (who catches on to this stuff better than I do) has already met with our church's accountant...and discussed much of this.

    I was just interested in how others handle it...and I appreciate the advice and things to consider.
     

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