If you’re new to the ministry, you may have heard about Form 4361 from someone. Likely another pastor has mentioned it and told you that it will save you a lot of money. What is this mysterious money-saving piece of paper?
What Is Form 4361?
Form 4361 is an IRS document that is used by ministers to opt out of public insurance programs. You can view the form itself here. Its official name is Application for Exemption From Self-Employment Tax for Use By Ministers, Members of Religious Orders and Christian Science Practitioners, which is why most people just refer to it as Form 4361.
The title references being exempt from self-employment tax because that is what is used to fund the public insurance programs Social Security and Medicare. An exemption means you don’t have to pay the taxes but you also don’t get to benefit from the programs (based on your exempt ministerial income).
The form includes your personal information, contact information, and also the information for the church or body that ordained, licensed, or commissioned you. You also have to give information regarding the date you were ordained, licensed, or commissioned, and when you have received $400 or more in self-employment income, at least some of it as compensation for ministerial services. That is because you have a limited time in which you are eligible to file the form and claim an exemption.
The Opportunity To Opt Out Of Self-Employment Taxes
As already mentioned, self-employment taxes are the 15.3% that ministers have to pay to fund Social Security and Medicare (even if you’re an employee of a church). Social Security is the safety net program that the US government developed in response to the crisis of the Great Depression. It has evolved over the years and now provides retirement benefits, survivor benefits, and disability benefits. Medicare is the program that provides healthcare for Americans over age 65.
Unlike most everyone else, pastors have the option to opt out of participation in these programs, and therefore, their taxes. Don’t you feel special?
Not all pastors can opt out, though. You can only opt out if you can sincerely say, “I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.)”
Why Would A Minister Opt Out?
It is illegal to opt out for economic reasons. The IRS makes that very clear. A legal exemption is based on one of two things:
- Conscientious opposition to the acceptance of public insurance
- Religious principles that oppose the acceptance of public insurance
So, it has to be either your conscience or your religious principles that drive the decision. The decision itself is about public insurance, which encompasses Social Security and Medicare.
I know a lot of pastors who opt out do so on the basis of the principle of stewardship. Everything we have is God’s and we are instructed to manage it wisely. Giving it to the government to mismanage is not good stewardship.
The Bible says that “a good person leaves an inheritance for their children’s children.” (Proverbs 13:22, NIV) Because of this, some pastors feel that it is wrong to prepare for the future by putting money into a system that won’t leave an inheritance for your children when you can easily save in a way that does.
For others, they equate accepting public insurance as relying on the government for provision instead of God. Dependence on the government violates their conscience and religious principles so they have grounds to request an exemption.
Warnings For Ministers Who Opt Out Of Social Security
Whether or not you choose to opt out is a personal decision that you need to pray and think deeply about. You will find some very strong opinions on the matter online, but I’m not here to tell you what decision to make. I do need to warn you, though, of the consequences of your decision.
If you choose to opt out of Social Security, you need to make up for the benefits the program provides on your own. You need to provide your own retirement savings, life insurance, and disability insurance. You can read all about how to do that here.
Some other articles that you might find useful are:
Opting Out Of Social Security: A Step By Step Guide
What You Need To Know About Social Security Even If You’ve Opted Out
Can You Still Receive Social Security Benefits Even After Opting Out?
How Medicare Works For Pastors Who Have Opted Out Of Social Security
37 Responses
Myra Seabrooks
May 11, 2020Great information.
Amy
May 16, 2020I’m glad you found it helpful, Myra.
Daniel
July 20, 2020Amy, do you know if a minister has to fill out form 4361 everytime he/she starts a new ministry position? In other words, if a minister goes to a new church, do they fill out a new 4361? Or is it a one-time form that is good for life?
Also, do you know if it is revocable?
Amy
July 21, 2020Daniel, no, the Form 4361 is a one-time event that a pastor uses to opt out of Social Security for his or her entire career in ministry. In general, Form 4361 is not revocable unless Congress makes a special, limited-time allowance to do so. At the moment, Form 4361 is not revocable. However, there is a proposal in Congress to give pastors a 2-year window in which to opt back in. I will be writing a blog post about it soon.
Victor
January 4, 2021Amy, we had a staff who used to work for our church and we applied the 4361 for him. However recently he decided to move on and switched to a different church organization and under a different umbrella. He requested to obtain his 4361 letter, should we share that info with him? Kindly advise. Thanks
Amy
January 13, 2021Victor, when a pastor opts out of Social Security, it is a lifetime decision that stays with him or her even as they move churches and organizations. It is the pastor’s responsibility to keep their records and answer to the IRS regarding their decision and the consequences. As such, I think you should share the letter with him (and tell him to put it somewhere very safe for the rest of his life). It is nice that you hang on to the letters for your staff (my church does as well, in their safe), but it is ultimately each individual pastor’s responsibility to have a copy of their approved Form 4361 in case they need it for any dealings with the IRS or Social Security Administration.
Benjamin Andrassy
January 17, 2021I’ve just submitted my Form 4361, from experience, what are the processing times?
Amy
January 19, 2021Benjamin, honestly, I’m not sure what the normal processing time is. I do know that right now things are really slow because of COVID. If anyone else reads this, please share how long it took for you.
Taylor B
April 13, 2021Hey Benjamin, I am curious if you have received the form back yet? I submitted my form around the same time but still have not received any correspondence from the IRS…
Benjamin P Andrassy
April 13, 2021I called a month ago and they were still working on December’s forms, so hopefully they’ll be getting to ours soon.
Amy
April 13, 2021Thanks, Benjamin!
Allison Davis
January 18, 2021If you opt out of Social Security do you still get all of the tax deductions that pastors normally receive?
Amy
January 19, 2021Allison, if you’re referring to the housing allowance, then yes. Opting out of Social Security has no affect on your ability to claim a housing allowance.
Amber
March 7, 2021PLEASE HELP ME UNDESTAND THIS RESPONSE FROM MY ACCOUNTANT (THIS IS DIFFERENT FROM MY ACCOUNTANT 3 YEARS AGO).
“we need to follow the Internal Revenue Code for housing allowance being exempt form self employment tax., as indicated in the link below. I haven’t found anything that supports your position (and believe me I looked)
https://www.irs.gov/faqs/interest-dividends-other-types-of-income/ministers-compensation-housing-allowance/ministers-compensation-housing-allowance
If you read the instructions for the 4361 itself, even there it states you have exemption from self employment tax for wages, for money earned doing your clerical duties.
“Non exempt earnings: Exemption from self employment tax does not apply to earnings from services that are not ministerial”. It doesn’t specifically say the housing allowance, but that is how it is usually interpreted. But what is exempt is wages for doing a specific kind of work. The parsonage allowance is earnings, but I don’t think it falls under that category of work.”
So…who do you say? I am a w-2 employee with a $16000 salary and $16000 Housing allowance. Do I owe self employment taxes on the housing allowance part? Does it mean I have to fill out the Schedule SE?
Amy
March 8, 2021Amber, please clarify for me, is your accountant saying that you need to pay self-employment taxes on your housing allowance even though you opted out of Social Security with Form 4361? Form 4361 covers all compensation for ministerial services, which includes the housing allowance. Part of the definition of the housing allowance is that it must be compensation for ministerial services. If you haven’t opted out, then you do need to pay self-employment tax on your housing allowance. I would recommend that you find a new tax preparer that is experienced in helping ministers. It sounds like your tax preparer doesn’t understand how this works and is just using Google to try to figure it out.
Michael
April 24, 2021I was ordained approximately 40 years ago. I did not opt out at that time. I have served in vocational ministry roles a few times over those years. I have returned in the last two years to a full-time vocational minister role. Can I still file the 4361? I thought there was a time limit in which you had to make make the election which I had exceeded.
Amy
April 25, 2021Yes, Michael, there is a time limit. You only have about 2 years from the time you start working in ministry to opt out, so it is too late for you.
Alfredo Bonilla
May 18, 2022I am an ordained minister and I also have a secular job, I applied for a mortgage loan. but in order to be able to use housing allowance to obtain a better loan amount, they ask me to fill out form 4361 to amend my 2020 and 2021 tax return. would it affect me in any area? thank you
Amy
May 29, 2022Alfredo, Form 4361 is used to opt out of Social Security and can only be done based on a conscientious objection to government insurance. It’s not something you do to get a mortgage loan. I’m not sure I understand their reasoning for telling you to do that, unless you need a lower tax bill to be able to afford the mortgage (in which case it probably isn’t affordable). Opting out only affects the taxes that you pay on your housing allowance, you are allowed a housing allowance whether or not you opt out.
Taylor
June 6, 2022I finally received my approved 4361 after a very long period… I decided to take advantage of the cares act self employment deferral for my 2020 taxes but now need to file a 1040x because the approved 4361. Do you know how I would file an amended return given the deferral? Anyone else in this situation who recently got their 4361 approved?
Justin
February 27, 2023I am a licensed employee at a church with an approved form 4361. I occasionally do freelance work (very similar to my church work) for other organizations. Is this freelance income also exempt from self-employment taxes?
Amy
April 9, 2023If you are providing ministerial services, then all of that income is exempt. The exemption is tied to the kinds of services you provide, not to a specific church.
Samantha Schieffer
May 16, 2023I have a question. I want to fill our the 4361 but I am unsure what to put for #4 because I was commissioned by my church, how ever I work for a different 401c ministry as a Chaplain. Whose employer Identification # do I provide? To clarify, the ministry I work under and get paid by is not who commissioned me.
Thank you,
Chaplain Samantha Schieffer
Amy
May 22, 2023Samantha,
It looks to me like it should be whoever commissioned you, which would be your church.
jane
September 25, 2023What about this reason for not enrolling? In 1981 our church paid us around $900 a month. Granted, we lived in a parsonage and all utilities except phone bills were paid. But with three young children and only one income, times were so tough that we couldn’t afford to pay into Social Security. Thankfully, our Synod has adopted a better formula for paying its called workers!
Amy
October 1, 2023Technically, that would be for economic reasons. I’m so glad your Synod is doing a better job of caring for its workers!
Heidi
October 8, 2023My husband (60 years old) was recently ordained and has been advised to submit form 4361. Does submitting this form now negate the benefits from everything he’s paid into the Social Security system over the past 40 yeas?
Amy
October 9, 2023No, opting out does not negate any benefits earned from previous (or current or future) secular work. I do want to point out, though, that you are only allowed to opt out for reasons of conscience. The IRS makes it very clear that you are not allowed to opt out for economic reasons.
Heidi
October 9, 2023Thank you! Yes, we did carefully read the form and have decided that it does not apply to us after all, which is unfortunate because our church has not been withholding social security tax for us … I wish we had found this site sooner. Our understanding had been that form 4361 was about separation of church and state–that the government couldn’t tax religious income. But we see now that is not accurate. Thank you for your very clear explanation of this and so many other things.
Bob
November 7, 2023Does Form 4361 – opt out – also mean you are not, or you are, eligible for ACA Marketplace Insurance?
Amy
November 7, 2023Bob, you are still eligible for ACA marketplace insurance even with an approved Form 4361.
Bob
November 8, 2023THANKS
Ryan
March 12, 2024Hi Amy,
I’ve worked for 20 years with a secular job and have enough credits to receive medicare. Last year I began working as a minister and received a w2 from the religious organization as well as a housing allowance. If I choose to become exempt from Social Security and Medicare should I use form 4029 or form 4361? Will I still receive medicare upon retirement based on the money I’ve already paid in over the last 20 years? Thank you for your very helpful answers.
Amy
March 15, 2024Ryan, if you are opting out as a minister, you would use Form 4361. The exemption does not negate benefits that you have already earned, so you would still receive premium-free Medicare Part A and any retirement benefits you have already earned. Your ministerial income just won’t be added to the calculations to increase your retirement benefits.