Mike Wittmer reprints a letter he once sent evangelical financial guru Dave Ramsey, who is “unwittingly advising ministers to break the law.”
Wittmer writes to Ramsey: “This has implications for the integrity of the minister and the testimony of Christ’s church. What would people think, especially those outside the church, if they knew that the same pastor who preaches honesty, sacrifice, and love for Christ above all lied to the government in order to save money on his taxes?”
He didn’t receive a response to his letter.
The following is from Ramsey’s website regarding the issue:
QUESTION: John asks if he should opt out of Social Security if he’s a full-time pastor.
ANSWER: Pastors can opt out of Social Security on a religious basis. Under the tax law you can be a conscientious objector. God clearly tells us to manage our money well and Social Security is not a good money manager, so you have a viable reason for opting out of Social Security.
If you don’t put your money in Social Security, you have to do the following three things:
1. You have to save for retirement.
2. You have to get life insurance.
3. You have to get long-term disability insurance.
You’ll have thousands of dollars more if you save this way.
Update: For those considering this issue for the first time, here is Russell Moore’s take on it.
For those wanting more details on the law, commenter “Mike A.” left this on a previous post of mine:
The folks who seem to think that the “conscientious objection” is a sort or blanket term that allows them to interpose their moral or economic opinions are mistaken. The IRS clearly limits the scope of that exception to “religious” principles.
The exemption requires you to be able to certify, under penalty of perjury, that your “conscientious objection” is based on a religious principle and not a general objection. The objection must be to receiving the benefits, not paying the tax. See IRS regulation following:
§ 1.1402(e)-2A Ministers, members of religious orders and Christian Science practitioners; application for exemption from self-employment tax.
…”Thus, ministers, members of religious orders, and Christian Science practitioners requesting exemption from social security coverage must meet either of two alternative tests: (1) A religious principles test which refers to the institutional principles and discipline of the particular religious denomination to which he belongs, or (2) a conscientious opposition test which refers to the opposition because of religious considerations of individual ministers, members of religious orders, and Christian Science practitioners (rather than opposition based upon the general conscience of any such individual or individuals).”
And from the IRS Audit Manual:
To claim exemption from self-employment tax, a minister must:
1. Be an ordained, commissioned, or licensed minister of a church or denomination. Treas. Reg.§ 1.1402(c)-5
2. File Form 4361. This is an application for exemption from self-employment tax for use by ministers, members of religious orders, and Christian Science practitioners. Treas. Reg. § 1.1402(e)-2A(a)(1).
3. Be conscientiously opposed to public insurance (Medicare/Medicaid and Social Security benefits) because of religious beliefs. Treas. Reg. § 1.402(e)-2A(a)(2).
4. File for exemption for reasons other than economic
5. Notify the church or order that he or she is opposed to public insurance. Treas. Reg. § 1.402(e)-5A(b).
6. Establish that the organization that ordained, licensed, or commissioned the minister is a tax-exempt religious organization.
7. Establish that the organization is a church or a convention or association of churches.
And Jeff Fisher:
As a pastor for five years and tax advisor for six, I agree with his advice that (most) pastors should not opt out of social security, because they are most likely lying (and thus, also committing perjury since it is to the federal gov’t) about their “ethical” exception.
Form 4361 specifically states that the pastor must be either:
1) under a vow of poverty
2) conscientiously opposed to any public insurance (death, disability, old age, retirement, payments toward medical care)
3) have religious principles opposed to public insurance (systems established by the Social Security Act.)
It cannot be because you think the system is broken or will be broke—it must be opposition based on principles—religious or conscientious; not financial, practical, or pragmatic. If that is the reason a pastor opts out of SECA, that is lying.
Additionally, the “I didn’t know any better” excuse is technically perjury as well since the form you sign says:
“Under penalties of perjury, I declare that I have examined this application and to the best of my knowledge and belief, it is true and correct.”
This is a sticky and complicated issue that unfortunately was not created for most evangelical pastors but has now been “acquired” as a nice little treat for pastors without most thoughtfully considering the implications of what they are doing and saying.