Skip to main content

Time Limits on Refund SE Tax After Exemption Gained

Question:

Does the IRS have time limits between when a minister was licensed and when he can begin applying an IRS-approved exemption from self-employment tax?

Answer:

The instructions to Form 4361, Application for Exemption from SE Tax for Use by Ministers, state the following:

"When to file. File Form 4361 by the due date, including extensions, of your tax return for the 2nd tax year in which you had at least $400 of net earnings from self-employment, any of which came from services performed as a minister, member of a religious order, or Christian Science practitioner."

It continues:

"Effective date of exemption. An exemption from self-employment tax is effective for all tax years ending after 1967 in which you have net self-employment earnings of $400 or more, if you receive any of it from ministerial services."

Be advised that, generally, you have until three years from the due date of a return to file an amendment (IRS Form 1040X) to receive a refund. For example, an individual earns $5,000 as a newly licensed minister in 2006 and, then, goes full-time in 2009, earning $50,000. He has until the due date, plus extensions, of his 2009 return to apply for exemption using Form 4361. However, the due date of his 2006 return was April 15, 2007. He has until April 15, 2010, to file for a refund of the SE tax that he paid on the $5,000 of ministerial earnings in 2006.

Comments

Popular posts from this blog

Qualified Small Employer HRAs

On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms.

After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers.

To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees.

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms.
No salary reduction contributions may be made (i.e., 100% employer-funded).Employer must receive proof of employee’s minimum essential coverage.Reimbursements must be for qualifying medical expenses.Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation.Employer must offer the …

Gifts Paid Out of Church Funds: Form 1099-MISC Requirements

Question:
 A church gave a wedding gift of $1000 to a couple who are church members. No goods or services were provided by the couple in exchange for the gift.  Is a Form 1099-MISC required? 
Answer: In the following answer, we assume that the couple are not employees of the church from whom the gift could not be viewed as compensation for their services. Also, the amount seems to be small enough to avoid any concerns of "private inurement."

Accordingly, no Form 1099-MISC is required. According to the 2017 IRS Instructions for Form 1099-MISC a Form 1099-MISC is only required for payment of goods or services. The requirements are as follows:
"File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:  At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8);  At least $600 in:  1. Rents (box 1);  2. Services performed by someone who is not your …

Revised Form I-9 Released

The U.S. Citizenship and Immigration Services released a revised Form I-9. All new hires after January 21, 2017, must complete the revised Form I-9. All prior released versions of Form I-9 will be invalid for new hires.

Employers are required to have a completed hard copy of Form I-9 on file for each employee. Current employees do not need to re-complete the revised form.

More information on Form I-9 can be found on the USCIS website.