Several months ago, I got an email that had me stumped. The writer was from a church that was exempt from paying FICA (payroll) taxes but wanted to start paying them. Since I was unsure how to answer the question, I referred her to a CPA that has helped me (and a lot of pastors and churches) with ministerial tax issues. She said she had searched the internet and couldn’t find an answer, so today I am solving that problem with the information provided by Wayne Vinson, CPA, of The Vin Group. 

Do Churches Pay FICA?

First, we have to look at the question of churches paying FICA. Not all churches pay FICA taxes for their employees. Churches have a choice. Churches who are opposed to paying FICA for religious reasons may exempt themselves by filing Form 8274. Employees of those churches have to pay their Social Security and Medicare payroll taxes as if they were self-employed. 

If a church is not opposed, then it will pay FICA taxes just like any other business for their non-minister employees. Ministers always pay all of their own payroll taxes as if they were self-employed unless they choose to opt out.  

How To Revoke A Church’s FICA Exemption

When a pastor opts out of Social Security and Medicare (payroll) taxes, it is permanent. There is no option to opt back in. However, the IRS does not take such a hard-line approach with churches. Churches are able to reverse their FICA exemption and start paying payroll taxes for their employees at any time. To revoke its exemption, a church simply has to start paying the taxes. 

How To Start Paying FICA Taxes For Churches

Form 941 is the form that employers file with the IRS along with the taxes that they have withheld from their employees’ paychecks. Even churches that don’t pay FICA fill this out and send it in with the income taxes that they have withheld from their (non-minister) employees’ pay. Exempt churches simply check a little box on the form (currently line 4) saying that they don’t have to pay Social Security and Medicare taxes and skip that section. 

To revoke the exemption, a church just doesn’t check that little box. Leave the box empty and then calculate the payroll tax obligation on the subsequent lines. Then, pay the tax liability in full when you submit the form. It’s that simple. You can make the change any time, just file and pay on or before the due date for the first quarter for which the revocation is to be effective. 

It would be wise, also, to let the non-minister employees know that they no longer have to pay both halves of the payroll taxes as if they were self-employed. I’m sure that will be welcome news for them.