Social Security 101 for Church Secretaries

Written by Julie Bloss

Anyone who gets a paycheck should understand some basic issues about Social Security. That's particularly true for church secretaries, because different Social Security rules apply to ministers and nonministers.

Taxpayers make contributions to Social Security through SECA and FICA. SECA (Self Employment Contributions Act) refers to the rate self-employed people pay toward Social Security. FICA (Federal Insurance Contributions Act) refers to the rate at which employers and employees contribute toward Social Security. In other words, people who are self-employed pay SECA and people who are employees, together with their employers, pay FICA.

SECA and FICA both have two parts. On income up to a certain amount (which changes annually), a taxpayer pays a percentage of income for retirement, death, and disability benefits. On income above a certain amount, an additional percentage is paid for Medicare.

If your church is properly reporting your income as an employee, you should be paying part of your FICA and your church should be paying part of your FICA (except in rare cases in which your church may have filed a Form 8274). Ministers, on the other hand, are always treated as self-employed for Social Security purposes for their ministerial income. That means they must always pay SECA on their ministerial income (except in rare cases where they have opted out).

If you were a freelance secretary who typed letters and papers for a number of different people rather than working for one employer, you would have to pay SECA on your self-employment income as well. What makes ministers unique is that even when a minister makes most of his income from one church, he is still treated as self-employed for purposes of Social Security. However, he's probably an employee for income tax purposes. That's why ministers are said to have a dual-tax status.

Some churches think they are doing their ministers a favor by paying FICA for them, but that's wrong. By law, the minister must pay SECA, including on housing. When churches pay and report FICA for their ministers, they mess up the Social Security Administration's (SSA) records. That could lead to incorrect benefit calculations when the minister wants to draw a benefit.

Churches can give ministers a Social Security "allowance" or "offset" to help with SECA payments. But this is really just extra income with a special name. The minister will have to pay Social Security taxes and income taxes on the allowance or offset.

Opting Out
Very few ministers meet the IRS guidelines to opt out of Social Security. They opt out by filing Form 4361, "Application for Exemption from Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners." Church secretaries cannot use this form and opt out of Social Security because they are not ministers for tax purposes.

Ministers can't opt out of Social Security because it's expensive or because they think it's a bad deal. They must certify to the IRS, under penalty of perjury, that they are opposed on the basis of religious principles to acceptance of public insurance, which includes payments for death, disability, retirement, or medical care. They also must certify that they have informed their ordaining body of this opposition.

Ministers who want to opt out of Social Security must file three copies of Form 4361 by the due date of the minister's tax return for the second year in which the minister had net earnings from self-employment of at least $400, any part of which came from ministerial income. The IRS must approve this application.

Form 8274
One way churches can legally avoid paying FICA for their employees is to file a Form 8274, "Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employer Social Security Taxes." A church can't sign the form simply because it has a tight budget and needs to save money; it must certify that is opposed for religious reasons to paying Social Security taxes. Very few churches can meet this standard. The deadline for filing this form is complicated and relates to the date on which the church had to file its first Form 8274 fairly soon after hiring their first nonministerial employee.

Churches who file Form 8274 aren't opting their employees out of Social Security-they are merely shifting the church's burden to the employees. Employees no longer have the church helping them pay FICA; instead, they must pay SECA. Churches who have filed Form 8274 should be sure their employees understand their Social Security obligations. (The SSA keeps records of your earning history, and it's a good idea for every taxpayer to check those records periodically to be sure they are correct. Download Form SSA-7004 from the Social Security Web site http://www.ssa.gov to check Social Security history..

Julie Bloss is a freelance writer and an attorney at the Annuity Board of the Southern Baptist Convention, Nashville, Tenn.

This article was adapted from "What Church Secretaries Need to Know About Social Security" in Secretary: FYI. Please see the original source for a full list of references cited in this article.

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