You’ve heard that as a pastor you can opt out of Social Security. But how do you actually do it? Here is a step-by-step guide showing how pastors can opt out of Social Security and the accompanying self-employment taxes. It’s really very simple:

Step 1: Qualify

Not just anyone can opt out of Social Security. There are certain criteria that must be met in order to do so:

• You must be ordained, commissioned, or licensed by a church.
• Your church must be a tax-exempt religious organization.
• You must oppose receiving public insurance because of your religious principles or be conscientiously opposed to it.
  
  

Step 2: File IRS Form 4361

Form 4361 is a simple, one-page form that includes your basic information, your church’s information and a statement stating your opposition that you must sign. You must file the form by the due date for the tax return for the second year in which you begin to receive ministerial income of $400 or more. For example, if you get licensed in 2015 and earn $10,000 as a pastor that year and the next, you must file the form by April 15, 2017 (or October 15, 2017, if you request an extension). This article explains the timing in more detail.

Step 3: Inform Your Church

You must inform the church that licensed, ordained, or commissioned you that you have a religious or conscientious opposition to the acceptance of public insurance. There is not a specific way that you have to inform them, but it would be a good idea to have it in writing and keep a copy of whatever you give them.

Step 4: Verify Your Grounds For Exemption

Once the IRS receives your Form 4361, they will mail you a statement that describes the grounds for receiving an exemption under section 1402(e) of the Internal Revenue Code. The statement must be signed, verifying that you have read it and seek exemption on the grounds listed on the statement. You must mail it back to the IRS within 90 days of receiving it in order to be approved.

Step 5: Receive Approved Copy Of Form 4361

If your exemption is approved, you will receive a copy of your Form 4361 marked “approved” for your permanent records. Make sure to keep your approved Form 4361 in a very safe place, like a safety deposit box or fireproof lock box. My church keeps all of the pastors’ forms for them in the church’s safe. Remember, though, it is your responsibility, not the church’s, to maintain a copy. I’ve heard from pastors who have reached retirement age and had trouble with the IRS because they couldn’t produce their copy.

Once you opt out of self-employment taxes you can’t just take the money and run. If you do that, you will surely regret it later, as I’ve heard from many pastors over the years. Social Security provides some essential safety nets, and once you’ve opted out it’s up to you to make sure you have them in place for yourself. Click here to read about what you need to do to make sure you’ve got your back covered. One last thing: Remember, the decision to opt out of Social Security is permanent, so don’t take it lightly.