Congratulations on being ordained or commissioned as a minister! Your character and maturity is a testimony of God’s sanctifying work in your life and your humility before Him. It’s a privilege to serve together with you. The information contained in this packet is intended to help you understand some of the financial and employment issues related to ministers. GCM is also shipping you a complimentary copy of a great resource in the Zondervan Minister’s Tax and Financial Guide. Please use this book as your starting point in educating yourself on the issues of social security tax, parsonage allowance, social security exemption, and other financial topics on being a minister. If you have additional questions, we strongly recommend you talk with a professional who is up to date on current practices in this field.
The following is included in this guide:
The first thing you should do is read the Minister’s Tax and Financial Guide. This book contains a wealth of the information you will need to properly understand your options and responsibilities as a minister. Next, you’ll want to request a parsonage allowance from GCM.
GCM strongly encourages you to contact a professional tax advisor to guide you in your personal tax responsibilities now that you are commissioned or ordained. Unfortunately, for legal reasons, GCM is not able to offer tax advice for your specific tax situation.
Complete a GCM Parsonage Request Form and email it to hr@gcmweb.org. You may find this form on StaffNet under the “Payroll” tab, in the “Forms” section. Once your parsonage amount has been approved, it will become effective on the next applicable pay period.
To change your parsonage amount in the future, simply complete a new Parsonage Request Form and email it to hr@gcmweb.org for approval. Dave Meldrum-Green, our Director of Organizational Affairs & Treasurer reviews and approves all parsonage requests.
Once GCM receives notice you’ve been ordained or commissioned, GCM will stop withholding social security (FICA) tax from your paychecks. However, you now have the personal responsibility to directly pay this tax to the government yourself.
Please read Chapter 7 in the Minister’s Tax and Financial Guide to find out about the option of opting out of social security tax. Remember, you cannot make this decision to opt out simply because you think you can achieve a better investment return on those funds elsewhere (economic reasons). You may also want to talk with other ministers who have dealt with this option. To obtain a copy of the IRS Form 4361, you may visit the IRS web site at www.irs.gov. We’ve also included additional reading resources from the ECFA. Be certain that if you make this decision to opt out, it is for the right reasons.
Once a minister communicates his decision to GCM to remain in the social security system (thereby giving up the option to opt out of the system) then GCM will give that employee an additional 7.65% in salary from that point forward. This additional GCM compensation is called a “Social Security Offset” and referred to as a FICA bonus (since it is designed to cover what would have previously been you FICA taxes).
To be eligible for the “SS Offset,” you must send an email to GCM notifying us of your decision to remain in the social security system. Please email hr@gcmweb.org and submit a new Support Goal Calculator.
Please read the section titled “Opting Out of Social Security” in Chapter 7 in Minister’s Tax & Financial Guide very carefully. Follow the instructions given in the Guide. You may also want to contact a tax or accounting professional for additional advice. GCM is not able to assist you with this decision. It is a completely personal decision. Remember this is a permanent decision.
You will, however, need to inform both GCM and your local church in writing that you are conscientiously opposed to public insurance as a minister, based upon religious convictions.
Please be aware that if you request a FICA bonus and then decide within the two years that you are opting out, you will also be required to repay the bonus total you have received to date.
1. Read the Zondervan Minister’s Tax & Financial Guide.
2. Complete the GCM Parsonage Request Form (See StaffNet Payroll tab). Send to hr@gcmweb.org.
3. Make an informed and well thought out decision about social security exemption. (Remember as a minister, you cannot opt out of social security simply for economic reasons).
4. Research additional resources below or seek professional tax and financial advice if necessary.
a. Church and Clergy Tax Guide by Richard R. Hammer.
Can be ordered through NACBA at 800-898-8085 or http://www.nacba.net
b. Income Tax Law for Ministers and Religious Workers by Worth Tax and Financial Service.
Or contact them at 574-267-4687. They are located in Warsaw, Indiana.
c. Internal Revenue Service Publication 517, “Social Security and Other Information for Members of the Clergy and Religious Workers”. www.irs.gov