Skip to main content

Contacting the IRS Regarding Altered Form 4361

Question:

A church treasurer recently was handed a Form 4361 by his church's youth minister. It appeared to have been altered. Can the treasurer contact the IRS to get verification of the approval?

Answer:
  
Regardless of the youth pastor’s success or failure to gain an exemption from self-employment (SE) tax on ministerial earnings (by virtue of his successful Form 4361 application), the church’s treatment of his wages is unaffected. By definition, a minister is a dual status employee. This means that he is considered self-employed for purposes of SE tax. He is not subject to nor eligible for FICA tax withholding and matching by the church. If he fails to pay his own SE tax on his personal return and it is determined by the IRS that he has no Form 4361 approval, he will be facing a very large tax penalty and interest assessment.

Our website provides an aid to preparing a church's Forms W-2. They are prepared in exactly the same way whether or not the pastor has opted out of SE tax.Select the Microsoft PowerPoint presentation entitled Church and Christian Ministry Compensation Concepts. by following the link provided here.


In one respect, our response could be, “don’t worry about it.” In another respect, our response could be, “Your youth pastor is making a terrible mistake. Whether in ignorance or in malice we cannot tell.”

Regarding a direct contact with the IRS to get verification of the approval, the IRS will not disclose private taxpayer information without authorization from the taxpayer.

Comments

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...

How can my ministry expenses be covered by the church?

     How can my ministry expenses be covered?                            Many ministers use their personal autos for ministry purposes. Their employers can reimburse these costs using a standard mileage rate published by the IRS. The per mile rate represents employees’ entire reimbursable cost other than highway tolls and parking tabs. If not covered by use of the ministries’ credit card, other costs can be reimbursed as well—business and travel meals, lodging, office supplies, and professional library purchases among them. Some ministries reimburse travel costs using per-diems published by the IRS. If employee business expenses are not reimbursed, the personal tax deduction benefit to the individual minister is severely limited. Non-taxable reimbursements after documentation is provided to the employer follows IRS rules for accountable plans. Non-taxable cash advances before expenses are in...

What is the best retirement account for a Minister?

       What are my options for retirement savings?                  Regardless of options, start now! You probably have learned about traditional and Roth IRAs. We have often found them well short of the benefits we will share here regarding Internal Revenue Code section 403(b) plans. These plans must be established by your employer (although you might need to be the initiator). They are funded in two ways—withholding from your paycheck at your option (called “elective deferrals”) and as initiated by the employer (matching or non-elective contributions). These contributions not only save income tax, but they also reduce the income you must report as subject to the 15.3% SECA tax. Further, at retirement with the cooperation of your church or Christian ministry the distributions to you can be tax-free to the extent of your qualified housing expenses. Many ministries also adopt what are often called “FICA alternative” be...