1136.Certain Church Employees Treated as Self-Employed
1136.1Can churches exclude income from employees from Social Security taxes?
Any church or church-controlled organization in existence on September 30, 1984, opposed for religious reasons to the payment of Social Security taxes, could make an election by October 31, 1984, to exclude from employment the services performed by its employees.
Any organization created after September 30, 1984, must file prior to the first date on which a quarterly employment tax return would otherwise be due if it wishes this exclusion.
1136.2How is the exemption filed?
An election is made by filing with the IRS Form 8274 (Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employers Social Security Taxes). This election applies to services performed after 1983.
1136.3What is the impact of excluding services from Social Security?
Where the exclusion is applicable, the services of those employees affected will be treated as services in a trade or business and covered as self-employment.
All present and future employees of churches and qualified church-controlled organizations that elect to exclude their employees' services from employment for Social Security purposes will be liable for self-employment taxes with respect to income from such services performed on or after January 1, 1984. Beginning with 1986, these persons must compute their “church employee income” separately from other earnings they may have from any other trade or business.
1136.4How is church employee income defined?
For this purpose, “church employee income” is the gross income for service as an employee of the church. No deductions are made. The income is subject to $100 rather than $400 floor taxation and coverage (see §1201.1). The limitations of $100 unreduced by expenses also applied to income in 1984 and 1985.
1136.5Does the exemption apply to church employee income?
As of 1986, the exemption from self-employment tax on grounds of religious belief (see §1128) does not apply to “church employee income.”
1136.6Is the exemption revokable?
The Tax Reform Act of 1986 permits a church or church-controlled organization that has elected not to pay Social Security employer taxes to revoke its election. This provision is effective as of October 22, 1986, the date of enactment of the Tax Reform Act of 1986.