Publication 517 - Introductory Material


What's New

Health care: Individual Responsibility. Beginning in 2014, individuals must have health care coverage, qualify for a health coverage exemption, or make a shared responsibility payment with their tax returns. If for any month in 2014, you, your spouse (if filing jointly), or your dependents did not have qualifying coverage and did not qualify for a coverage exemption, then you must make a shared responsibility payment. See the instructions for line 61 in the Form 1040 instructions and Form 8965 for more information.

Premium tax credit. You may be eligible to claim the premium tax credit if you, your spouse, or a dependent enrolled in health insurance through the Health Insurance Marketplace. See the instructions for line 69 in the Form 1040 instructions and Form 8962 for more information.

Advance payment of the premium tax credit. Advance payments of the premium tax credit may have been made to the health insurer to help pay for the insurance coverage of you, your spouse, or a dependent. If advance payments of the premium tax credit were made, you must file a 2014 return and Form 8962. For more information, see the instructions for Form 8962.

Earnings subject to social security. For 2014, the maximum wages and self-employment income subject to social security tax increases from $113,700 to $117,000. For 2015, the maximum wages and self-employment income subject to social security tax is $118,500.

Modified AGI limit for traditional IRA contributions increased. For 2014, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is:

  • Less than $116,000 if married filing jointly or qualifying widow(er),

  • Less than $70,000 if single or head of household, or

  • Less than $10,000 if married filing separately.

If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $191,000.

Modified AGI limit for Roth IRA contributions increased. For 2014, you may be able to contribute to your Roth IRA if your modified AGI is:

  • Less than $191,000 if married filing jointly or qualifying widow(er),

  • Less than $129,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or

  • Less than $10,000 if married filing separately and you lived with your spouse at any time during the year.

Earned income credit (EIC). For 2014, the maximum amount of income you can earn and still claim the EIC has increased. You may be able to take the EIC if you earned less than $46,997 ($52,427 for married filing jointly) and you have three or more qualifying children; $43,756 ($49,186 for married filing jointly) and you have two qualifying children; $38,511 ($43,941 for married filing jointly) and you have one qualifying child; and $14,590 ($20,020 for married filing jointly) and you do not have any qualifying children.

Reminders

SE tax rate. For 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12.4%. The Medicare (HI) portion of the SE tax remains 2.9%. As a result, the SE tax rate is 15.3%. For more information, see the Instructions for Schedule SE (Form 1040).

Additional Medicare Tax. A 0.9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:

  • $125,000 if married filing separately,

  • $250,000 if married filing jointly, or

  • $200,000 for any other filing status.

For more information, see Form 8959, Additional Medicare Tax, and its separate instructions.

Future developments. .  For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www.irs.gov/pub517.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Social security and Medicare taxes are collected under one of two systems. Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. No earnings are subject to both systems.

Table 1. Are Your Ministerial Earnings* Covered Under FICA or SECA?

Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Do not rely on this table alone. Also read the discussion for the class in the following pages.

Class Covered under FICA? Covered under SECA?
Minister NO. Your ministerial earnings are exempt. YES, if you do not have an approved exemption from the IRS. 
 
NO, if you have an approved exemption.
Member of a religious order who has not taken a vow of poverty NO. Your ministerial earnings are exempt. YES, if you do not have an approved exemption from the IRS. 
 
NO, if you have an approved exemption.
Member of a religious order who has taken a vow of poverty YES, if:
  • Your order elected FICA coverage for its members, or

  • You worked outside the order and the work was not required by, or done on behalf of, the order.

 
 
NO, if neither of the above applies.
NO. Your ministerial earnings are exempt.
Christian Science practitioner or reader NO. Your ministerial earnings are exempt. YES, if you do not have an approved exemption from the IRS. 
 
NO, if you have an approved exemption.
Religious worker (church employee) YES, if your employer did not elect to exclude you.  
 
 
NO, if your employer elected to exclude you.
YES, if your employer elected to exclude you from FICA. 
 
NO, if you are covered under FICA.
Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. 
 
 
NO, if you have an approved exemption.
YES, if you are self-employed and do not have an approved exemption from the IRS. 
 
NO, if you have an approved exemption.
* Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later.

In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0.9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:

  • $125,000 if married filing separately,

  • $250,000 if married filing jointly, or

  • $200,000 for any other filing status.

Medicare wages and self-employment income are combined to determine if income exceeds the threshold. A self-employment loss is not considered for purposes of this tax. RRTA compensation is separately compared to the threshold. There is no employer match for Additional Medicare Tax. For more information, see Form 8959, Additional Medicare Tax, and its separate instructions.

This publication contains information for the following classes of taxpayers.

  • Ministers.

  • Members of a religious order.

  • Christian Science practitioners and readers.

  • Religious workers (church employees).

  • Members of a recognized religious sect.

Note.

Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers.

This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect.

  • Which earnings are taxed under FICA and which under SECA. See Table 1 above.

  • How a member of the clergy can apply for an exemption from self-employment tax.

  • How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes.

  • How a member of the clergy or religious worker figures net earnings from self-employment.

This publication also covers certain income tax rules of interest to ministers and members of a religious order.

A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister.

In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. You will find these worksheets right after the Comprehensive Example .

Note.

In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion.

Comments and suggestions.    We welcome your comments about this publication and your suggestions for future editions.

  You can send us comments from www.irs.gov/formspubs. Click on “More Information” and then on “Give us feedback.

  Or you can write to:

Internal Revenue Service 
Tax Forms and Publications 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

  Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.

Ordering forms and publications.    Visit www.irs.gov/formspubs to download forms and publications. Otherwise, you can go to www.irs.gov/orderforms to order forms or call 1-800-829-3676 to order current and prior-year forms and instructions. Your order should arrive within 10 business days.

Tax questions.    If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to the above address.

Useful Items - You may want to see:

Publication

  • 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad

  • 525 Taxable and Nontaxable Income

  • 529 Miscellaneous Deductions

  • 535 Business Expenses

  • 590-A Contributions to Individual Retirement Arrangements (IRAs)

  • 590-B Distributions from Individual Retirement Arrangements (IRAs)

  • 596 Earned Income Credit (EIC)

Form (and Instructions)

  • SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

  • SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act

  • Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship)

  • Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship)

  • Schedule SE (Form 1040) Self-Employment Tax

  • 1040-ES Estimated Tax for Individuals

  • 1040X Amended U.S. Individual Income Tax Return

  • 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits

  • 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners

  • 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes

  • 8959 Additional Medicare Tax

  • 8962 Premium Tax Credit (PTC)

  • 8965 Health Coverage Exemptions

Ordering publications and forms.   See How To Get Tax Help, near the end of this publication, for information about getting these publications and forms.


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