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Excise tax on excess executive compensation. Cer- ployment tax on religious grounds. The application must
tain tax-exempt organizations may be subject to an excise be based on conscientious opposition because of per-
tax on excess executive compensation. For more informa- sonal considerations to public insurance that makes pay-
tion, see the Instructions for Form 4720. ments in the event of death, disability, old age, or retire-
ment, or that makes payments toward the cost of, or

4. Religious Exemptions and provides services for, medical care, including social se-
curity and Medicare benefits. The exemption applies only
Special Rules for Ministers to qualified services performed for the religious organiza-
tion. See Revenue Procedure 91-20, 1991-1 C.B. 524, for
guidelines to determine whether an organization is a reli-
Special rules apply to the treatment of ministers for social gious order or whether an individual is a member of a reli-
security and Medicare tax purposes. An exemption from gious order.
social security and Medicare taxes is available for minis- To apply for the exemption, the employee should file
ters and certain other religious workers and members of Form 4361. See Pub. 517 for more information about
certain recognized religious sects. For more information claiming an exemption from self-employment tax using
on getting an exemption, see Pub. 517. Form 4361.
Ministers. Ministers are individuals who are duly or- Members of recognized religious sects opposed to
dained, commissioned, or licensed by a religious body insurance. If you belong to a recognized religious sect or
constituting a church or church denomination. They are to a division of such sect that is opposed to insurance, you
given the authority to conduct religious worship, perform may qualify for an exemption from the self-employment
sacerdotal functions, and administer ordinances and sac- tax. To qualify, you must be conscientiously opposed to
raments according to the prescribed tenets and practices accepting the benefits of any public or private insurance
of that religious organization. that makes payments because of death, disability, old
Ministers are employees if they perform services in the age, or retirement, or makes payments toward the cost of,
exercise of ministry and are subject to your will and con- or provides services for, medical care (including social se-
trol. The common-law rules discussed in section 1 and curity and Medicare benefits). If you buy a retirement an-
section 2 should be applied to determine whether a minis- nuity from an insurance company, you won't be eligible for
ter is your employee or is self-employed. Whether the this exemption. Religious opposition based on the teach-
minister is an employee or self-employed, the earnings of ings of the sect is the only legal basis for the exemption. In
a minister aren't subject to federal income, social security, addition, your religious sect (or division) must have exis-
and Medicare tax withholding. However, even if the minis- ted since December 31, 1950.
ter is a common-law employee, the earnings as reported Self-employed. If you’re self-employed and a member
on the minister's Form 1040 or 1040-SR are subject to of a recognized religious sect opposed to insurance, you
self-employment tax and federal income tax. You don't can apply for exemption by filing Form 4029 to waive all
withhold these taxes from wages earned by a minister, but social security and Medicare benefits.
if the minister is your employee, you may agree with the
minister to voluntarily withhold tax to cover the minister's Employees. The social security and Medicare tax ex-
liability for self-employment tax and federal income tax. emption available to the self-employed who are members
For more information, see Pub. 517. of a recognized religious sect opposed to insurance is
Form W-2. If your minister is an employee, report all also available to their employees who are members of
such a sect. This applies to partnerships only if each part-
taxable compensation as wages in box 1 on Form W-2. In- ner is a member of the sect. This exemption for employ-
clude in this amount expense allowances or reimburse- ees applies only if both the employee and the employer
ments paid under a nonaccountable plan, discussed in are members of such a sect, and the employer has an ex-
section 5 of Pub. 15. Don't include a parsonage allowance emption. To get the exemption, the employee must file
(excludable housing allowance) in this amount. You may Form 4029.
report a designated parsonage or rental allowance (hous- An employee of a church or church-controlled organi-
ing allowance) and a utilities allowance, or the rental value zation that is exempt from social security and Medicare
of housing provided in a separate statement or in box 14 taxes can also apply for an exemption on Form 4029.
on Form W-2. Don't show on Form W-2, Form 941, or
Form 944 any amount as social security or Medicare wa-
ges, or any withholding for social security or Medicare 5. Wages and Other
taxes. If you withheld federal income tax from the minister
under a voluntary agreement, this amount should be Compensation
shown in box 2 on Form W-2 as federal income tax with-
held. For more information on ministers, see Pub. 517. Pub. 15 provides a general discussion of taxable wages.
Exemptions for ministers and others. Certain or- Pub. 15-B discusses fringe benefits. The following topics
dained ministers, Christian Science practitioners, and supplement those discussions.
members of religious orders who haven't taken a vow of
poverty may apply to exempt their earnings from self-em-

Publication 15-A (2020) Page 11