October 06, 2012

FICA Tax Withholding for Minister Teaching at Church School


Question:

A licensed or ordained minister at a church has opted out of social security and Medicare. He is now employed at a Christian school teaching music. Is this considered ministerial income subject to self-employment (SE) tax or non-ministerial income subject to FICA withholding tax?

Answer:

Non-ministers are subject to mandatory FICA tax withholding. Ministers are subject to self-employment tax. Some ministers have qualified to opt-out of paying this tax.

IRS Pub 517 partially addresses the question posted here:

"Teachers or administrators.   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. However, if you perform services as a teacher or administrator on the faculty of a non-church college [including non-church schools and universities], you cannot exclude from your income a housing allowance or the value of a home that is provided to you."

The principles communicated in Publication 517 apply to a Christian school teacher’s classification as a minister. In the case of the music minister, it appears that he meets the definition of a minister for purposes of his employment at the Christian school. Accordingly, he continues to be eligible for his exemption from SE tax. Further, as a qualified minister, he is not subject to FICA tax withholding.

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