4.19.6 SSA Correspondence and Minister and Religious Waiver Programs

Manual Transmittal

August 14, 2017

Purpose

(1) This transmits revised IRM 4.19.6, Liability Determination, SSA Correspondence, Minister/Religious Waivers, and Information Return Penalties (IRP). IRM 4.19.6 has been renamed as, SSA Correspondence and Minister and Religious Waiver Programs.

Material Changes

(1) Deleted the information in IRM 4.19.6.1, Overview and 4.19.6.2, Related IRMs and Publications, added a new internal controls subsection 4.19.6.1, Program Scope and Objectives, and renumbered remaining sections. 4.19.6.1 now includes the following subsections:

  1. 4.19.6.1.1, Background

  2. 4.19.6.1.2, Authority

  3. 4.19.6.1.3, Responsibilities

  4. 4.19.6.1.4, Program Reports

  5. 4.19.6.1.5, Terms

  6. 4.19.6.1.6, Acronyms

  7. 4.19.6.1.7, Related Resources

(2) 4.19.6.4.1.3, Procedures for SSA SE-DPR - In step 2 of the fourth row, third column, first bullet of the If/Then table, changed "Deduction for 1/2 SE tax" to "Deductible part of SE tax" .

(3) 4.19.6.1.2, Interim Letters - This subsection has been revised to add clarity, moved to 4.19.6.2, and renamed, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61).

(4) 4.19.6.5, Information Return Penalty (IRP) Campus Procedures - This section and all corresponding subsections have been moved to a new IRM 4.19.25, Information Return Penalty (IRP) Procedures. All related IRM reference in 4.19.6 have been corrected to reflect the tridoc changes.

(5) 4.19.6.6, Manager/Coordinator Responsibilities - This subsection and all corresponding subsections have been moved to IRM 4.19.25.21, and renamed Manager/Coordinator Responsibilities - General.

(6) Renumbered 4.19.6.4, SSA Correspondence - Added new (2).

(7) Renumbered 4.19.6.5, Introduction to Religious Waivers - Added new (6). Added a note in (5).

  1. 4.19.6.5.3, General Guidelines for Form 4361 - Revised the If/Then table in (1) for clarity.

  2. 4.19.6.5.4, Criteria for Approving Form 4361 - In paragraph (1), combined the third Note into the second Note and moved (a) to a new (e).

  3. 4.19.6.5.6, Was the Application Timely? - Moved the Reminder from (1) to the last row of the If/Then table in (4). Revised the content from IRM 4.19.6.5.14, Form 4361 Not Received Timely, and moved to IRM 4.19.6.5.6 as a new (5).

  4. 4.19.6.5.7, Is Form 4361 Complete? - Moved the note from (1)h to (c).

(8) 4.19.6.5.13, Disapproving Form 4361 - The entire section has been revised for clarity.

(9) 4.19.6.5.14, form 4361 Not Received Timely - This section has been deleted. The content has been revised for clarity and moved to IRM 4.19.6.5.6, Was the Application Timely?, as a new (5).

(10) Renumbered 4.19.6.5.15, Form 4361 Incomplete - Moved entire section to a new (2) in 4.19.6.5.7, Is Form 4361 Complete? and restructured the information for clarity.

(11) 4.19.6.5.16, Previously Disapproved Form 4361 - The entire section has been revised for clarity.

(12) Renumbered 4.19.6.6.1(6)a, Added a new IF/THEN table.

(13) 4.19.6.6.4, Forms 4092 Not Timely Filed - Entire section has been deleted.

(14) IRM Exhibits 4.19.6-1 and 4.19.6-2 have been moved to IRM 4.19.25 as Exhibits 4.19.25-1 and 4.19.25-2.

Effect on Other Documents

This material supersedes IRM 4.19.6, dated October 18, 2016. The following IRM Procedures Updates (IPUs) issued from 11/1/2016 to 12/31/2016 have been incorporated into this IRM: IPU 16A0303, IPU 16U1676, and IPU 16U1742.

Audience

Employees responsible for processing SSA Correspondence and/or Minister/Religious Waivers at the Small Business/Self Employed site.

Effective Date

(08-14-2017)

Michael W. Damasiewicz
Director, Exam Field and Campus Policy
Small Business Self Employed

Program Scope and Objectives

  1. Purpose. This IRM is designed to instruct the employees in the Small Business/Self Employed (SB/SE) Operating Division in processing Social Security Administration (SSA) Correspondence and Minister/Religious Waivers. Specifically, IRM 4.19.6:

    1. Describes the steps for processing the various types of correspondence from the Social Security Administration (SSA) that includes the Self-Employment Determination Posting Record (SE-DPR), the Wage Determination Posting Records (Wage DPR), and Unreported Tip Income.

    2. Provides instructions for processing Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, and Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.

  2. Audience. These procedures apply to IRS employees who are responsible for processing SSA Correspondence and/or Minister/Religious Waivers including:

    • Management Officials

    • Lead Tax Examiners

    • Tax Examiners

    • Lead Clerks

    • Clerks

  3. Policy Owner. Examination Field and Campus Policy is under the Examination Field and Campus Policy, Small Business/Self-Employed (SB/SE) Division.

  4. Program Owner. BMF Document Matching, under Exam Field and Campus Policy is responsible for the content of this IRM and providing guidance.

Background

  1. SSA Correspondence - The Internal Revenue Service receives various types of miscellaneous correspondence from the Social Security Administration (SSA). When SSA determines that a taxpayer’s self-employment (SE) earnings have been omitted or incorrectly reported on Form 1040, they notify the IRS via the SE Determination Posting Record (SE-DPR). SSA sends the IRS a Wage DPR when wages or tips to an employee (or a third party name holder) have been omitted from their earnings record or reported incorrectly.

  2. Minister Waivers - Qualifying taxpayers may file for an exemption from:

    1. Social security and medicare tax by filing Form 4029, Application for Exemption from Social Security and Medicare Taxes and Waiver of Benefits.

    2. Self-employment tax by filing Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners.

  3. This IRM contains instructions for evaluating and processing these forms.

Authority

  1. For the SSA Correspondence program, the Internal Revenue Service receives various types of miscellaneous correspondence from the Social Security Administration (SSA). These are:

    • Self-Employment Determination Posting Record (SE-DPR) - a determination by SSA that, as a result of an investigation, a taxpayer’s SE earnings have been omitted or incorrectly reported on Form 1040, U.S. Individual Income Tax Return.

    • Wage Determination Posting Record (Wage DPR) - a determination by SSA identifying when wages or tips to an employee (or a third party name holder) have been omitted from their earnings record or were reported erroneously or inaccurately.

  2. For the Minister Waiver program:

    1. Rev. Proc. 91–20, 1991–1 C.B. 524, provides guidance in determining whether an organization constitutes a religious order under the IRC.

    2. IRC 1402(e) provides exemption from the definition of net earnings from self-employment income to ministers, members of religious orders, and Christian Science practitioners.

    3. IRC 1402(g)(1) provides exemption for members of certain religious faiths from all benefits and other payments under Titles II and XVIII of the Social Security Act on the basis of wages and self-employment income.

Responsibilities

  1. The Director, Small Business/Self-Employed (SB/SE), Exam Field and Campus Policy is the executive responsible for the SSA Correspondence and Minister Waiver programs.

  2. Management officials are responsible for:

    1. Providing internal controls relating to each program, process or activity.

    2. Ensuring the instructions are communicated to and carried out by the proper officers and employees.

Program Reports

  1. Inventory is monitored through the use of the Control-D reporting system.

Terms

  1. SSA Correspondence - Correspondence received from the Social Security Administration (SSA) in the form of:

    • Form 7000, Self-Employment Determination Posting Record (SE-DPR),

    • Form 7010, Wage Determination Posting Records (Wage DPR), and

    • Unreported Tip Income

  2. Religious Waiver - Religious waivers are requests for exemption from social security and medicare taxes and are filed with the IRS using:

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

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

Acronyms

  1. The following acronyms apply to this IRM:

    Acronym Definition
    BMF Business Master File
    CAF Centralized Authorization File
    CFOL Corporate File On-line
    DLN Document Locator Number
    DPR Determination Posting Record
    EIN Employer Identification Number
    FICA Federal Insurance Contributions Act
    IAT Integrated Automation Technologies
    IDRS Integrated Data Retrieval System
    IMF Individual Master File
    IRC Internal Revenue Code
    MFT Master File Tax Account Code
    PGLD Privacy, Government Liaison and Disclosure
    POA Power of Attorney
    RSED Refund Statute Expiration Date
    SE Self-Employment
    SE-DPR SE Determination Posting Record
    SP Submission Processing
    SSA Social Security Administration
    SSN Social Security Number
    TDI Taxpayer Delinquency Investigation
    TEGE Tax Exempt & Government Entities
    TIA Tax Information Authorization
    TIN Taxpayer Identification Number
    TY Tax Year

Related Resources

  1. The following additional resource material is listed when it is determined that in-depth research is required to resolve unusual technical issues not covered in this IRM. When reference to one of the related IRMs is required, the complete IRM reference will be stated in this IRM.

    Note:

    Technical issues that occur frequently should be brought to the attention of the IRM 4.19.6, SSA Correspondence and Minister and Religious Waiver Programs, author for consideration for inclusion in this IRM.

    IRM Title Summary
    IRM 11.3.1 Introduction to Disclosure Provides an overview of the disclosure program and addresses the instructions, guidelines, and procedures necessary for the introduction to Disclosure.
    IRM 2.3 IDRS Terminal Responses Provides instructions for the use of the Integrated Data Retrieval System (IDRS) terminal displays.
    IRM 2.4 IDRS Terminal Input Provides instructions for the input and use of IDRS command codes.
    IRM 3.13.5 Individual Master File (IMF) Account Numbers Provides information relating to establishing Social Security Numbers (SSNs) for the Entity function.
    IRM 21.6 Individual Tax Returns Provides instructions for making adjustments specific to individual taxpayer (IMF) accounts.

Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61)

  1. Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) are the result of a task force initiated to provide timely, quality responses to taxpayer correspondence. The general guidelines are:

    • A quality response is an accurate and professional communication which, based on information provided, resolves the taxpayer issues.

    • Requests additional information from the taxpayer, or

    • Notifies the taxpayer we have requested information from outside the IRS.

  2. A quality response is timely when initiated within 30 calendar days of the IRS Received Date.

  3. When a quality response cannot be issued timely, an interim response must be initiated by the 30th calendar day from the IRS Received Date.

    1. An interim letter (Letter 2645C or Letter 5825C when it becomes available) is generated when the Clerical Function controls an incoming receipt.

    2. Subsequent interim letters (Letter 2644C or Letter 5825C when it becomes available) must be issued when a final resolution cannot be provided as indicated in the previous interim letter.

  4. All interim letters should inform the taxpayer when a final response can be expected and provide a contact name and number for additional inquiries.

SSA Correspondence

  1. Internal Revenue Service receives various types of miscellaneous correspondence from the Social Security Administration (SSA). This subsection provides procedures for processing:

    • Self-Employment Determination Posting Record (SE-DPR),

    • Wage Determination Posting Records (Wage DPR), and

    • Unreported Tip Income

  2. Appropriate Integrated Automation Technology (IAT)/Quick Command Code (CC) Tools must be used when working cases where applicable.

SE Determination Posting Record (AKA 7000)

  1. When SSA determines, as a result of an investigation, taxpayer's self-employment (SE) earnings have been omitted or incorrectly reported on Form 1040, they notify the Internal Revenue Service via the SE Determination Posting Record (SE-DPR).

  2. An SSA internal earnings record adjustment does not constitute a claim per Rev. Rul. 56-297.

  3. Adjustments based on SSA determination cannot be made after statute expiration date unless accompanied by a taxpayer claim filed prior to statute expiration date.

  4. See IRM 21.5.3.4, General Claims Procedures.

SSA Address for Corrections
  1. Notify SSA of changes in SE earnings that do not agree with those on the SE-DPR.

    Note:

    All information sent to SSA disclosing taxpayer information, beyond what SSA originally provided, must be signed by one of the following: Division Commissioner, TEGE; or the Deputy Director, Privacy, Government Liaison and Disclosure (PGLD); or a Director, Exam Policy. These officials may re-delegate disclosure authority to any supervisor under their authority, however, there must be an actual delegation order in existence at the time the supervisor exercises the disclosure authority.

  2. If there are other apparent errors on the SE-DPR, notify the SSA field office where the determination originated.

Description of SSA SE Determination Posting Record (SE-DPR)
  1. Entity portion of SSA record contains the following:

    • Number holder's name

    • SSN

    • Address and phone number

    • Nature of business

    • Business address

  2. The fields of the SE-DPR are as follows:

    1. NET CHANGE SE EARNINGS reports the net change to SE Earnings.

    2. NET CHANGE SE MEDICARE reports the net Medicare change.

    3. TOT SE FICA/YR reports the FICA.

    4. TOT SE MEDI/YR reports Medicare.

    5. NON FARM OPTION reports "N" (for no) or "Y" (for yes).

    6. BASIS FOR CHANGE includes a description of the reason for the change.

    7. STAT LIM EXCEPTION refers to SSA statue and states "apparent error" or other SSA statue exception.

      Note:

      This is not the IRS Statute of Limitation field.

    8. DATE 1040 FILED

    9. TAXPAYER NAME

    10. SSN OF REL ADJ

    11. JOINT RETURN reports N (for no) or Y (for yes).

    12. SPOUSE NAME

    13. SPOUSE SSN

    14. TAX LIABILITY reports N (for no) or Y (for yes).Y

    15. ACTION describes the type of action

    16. RATIONALE may display a more detailed explanation of the change.

      Note:

      Based on the "Rationale" given by SSA, you may want to consider all years listed in possible fraud cases. Refer to the Campus Examination Fraud Coordinator.

    17. SSA OFFICE ADDR reports the SSA field office address.

  3. When reviewing SSA SE-DPR fields:

    If Then
    "NET CHANGE SE EARNINGS" field displays a positive number and ACTION field displays "Add" , "Change" or "Move" Subtract it from "TOT SE FICA/YR" figure to determine previously posted earnings

    Example:

    NET CHANGE SE EARNINGS is $924, TOTAL SE FICA/YR is $10,767. Then the previously posted SE earnings were $9,843 ($10,767 - $924 = $ 9,843). This results in an increase to SE tax.

    "NET CHANGE SE EARNINGS" field displays a negative number (e.g., $1,800.00–) and the “ACTION” field displays "Delete" , "Change " , "Partial Move" or "Disclaimed " Add the absolute figure to the TOT SE FICA/YR figure to determine previously posted earnings

    Example:

    NET -CHANGE SE EARNINGS is $1,800.00–, TOTAL ,SE FICA/YR is $10,800. Then the previously posted SE earnings were $12,600 ($10,800 + $1,800 = $12,600).This results in an decrease to SE tax.

    "NEW SE EARNINGS" and "NET CHANGE" fields display same figure and “ACTION” listed is "Add" Adjustment to increase SE tax is needed. SSA is establishing earnings for this taxpayer (e.g., Net Change $5,000.00. New SE Earnings $5,000.00 ). Previously posted earnings were zero. This results in a tax increase to SE tax.
    "NON-FARM OPTION" field shows a "Y" (yes) SE net earnings were computed using an optional "Non-Farm" method on Form 1040, Schedule SE.

    Note:

    This option may only be used five times by taxpayer. An "N" (no) indicates regular self employment or "FARM OPTION."

    "NEW SE MEDICARE/NET CHANGE" field
    1. Process following "Net Change" (positive/negative) procedures in this table to determine previously posted amounts.

    2. Beginning with tax year 1994, all covered earnings are subject to Medicare taxes.

    Note:

    Document 6209, IRS Processing Codes and Information.

    "CHANGE FROM WAGES" field Entries are usually "no." Can be "yes" if SSA deleted wages from employer due to SE income determination (e.g., independent contractor issue).
    "BASIS FOR CHANGE" field Contains a statement regarding reason for change.
    "Statute of Limitations" field Refers to SSA statute and states "apparent error" or other SSA statute exception.

    Note:

    This is not the IRS Statute of Limitation field.

    "SSN OF RELATED ADJUSTMENT" field SSN of person who is also affected by adjustment.
    "TAX LIABILITY CHANGE" field Usually annotated "yes." If yes, this indicates that the tax year is within the Statute period and can be worked by IRS. If no, check IDRS to determine that Statute date work accordingly.

    Note:

    See "Rationale" field instructions.

    "RATIONALE" field May contain a more detailed explanation of change.

    Note:

    Based on the "Rationale" given by SSA, you may want to consider all years listed in possible fraud cases. Refer to the Campus Examination Fraud Coordinator.

Procedures for SSA SE-DPR
  1. Research primary or secondary TIN on SSA SE-DPR, using appropriate Corporate File Online (CFOL) command codes. Compare new SE Income amount against IDRS SE Income figure. Take the appropriate action indicated below:

    Note:

    Keep in mind that SE income and SE tax may not have been properly adjusted with prior TC 290 or 291 adjustments.

    If And Then
    SE tax amount(s) on SSA SE-DPR matches posted Master File SE tax no tax liability change is required PROCESS AS CLASSIFIED WASTE.
    If the tax year is within 90 days of statute expiration date Research for extensions, amended returns, late payments, etc. Follow Statute Guidelines found in IRM 4.19.6.3.1.3, Statutes Procedures for SSA SE-DPR.
    There is an increase in tax (positive figure in "net change" field) Process in accordance with IRM 21.5Account Resolution and IRM 21.6 Individual Tax Returns.
    Tax decreases (a negative figure in "net change" field) the statute of limitations is open 1. Research for a related claim. Request all returns and TC 29X adjustments on account to locate taxpayer's claim.
    a. If claim is located, adjust SE income and tax using information on claim and SSA SE-DPR.
    b. If claim not located,
    • send taxpayer Letter 2528C (with Form 843 enclosed),

    • advise taxpayer he/she may be entitled to a refund based on information received from SSA and invite a claim. See IRM 21.5.3.4 , General Claims Procedures.

    • Input TC 290–0 with Reason Code 044 in appropriate blocking series to file with original return.

    • When taxpayer's claim is received, request original return and SSA listing.

    • Adjust SE income and tax using information on claim and SSA SE-DPR.


    2. If taxpayer is due a refund resulting from a claim, remember to make necessary adjustments to return amounts affected by changes to SE income or SE tax.
    • Deductible part of SE tax,

    • Taxable Social Security benefits,

    • Child Care Credit,

    • EITC,

    • Computation of estimated tax penalty/alternative minimum tax,

    • Medical deduction

    • Additional Medicare Tax

    Reminder:

    In certain circumstances, a letter can be an informal claim for refund. You should review accounts for indications that correspondence may have been received that could qualify as a timely filed claim for refund.

    There is no record of a return filed
    1. Research for a TDI assignment code. If there is an open TDI, annotate SSA SE-DPR with assignment code, tax period and cycle of TDI issuance, and forward to Campus Collection Operations.

    2. If there is no open TDI, initiate phone contact or correspond (Letter 4268C) with taxpayer. Request information to assist in locating return or obtain return(s) if none is filed. SeeIRM 21.1.3.2General Disclosure Guidelines.

    1. Suspend 45 days for a response.

    2. If taxpayer does not respond (no return secured) and no record of an open TDI exists, notate on the SE-DPR "No Reply TDI" for each tax period reflected on SE-DPR. Forward to the TDI unit. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. If original return is received, forward for processing, with a copy of the SSA SE-DPR attached.


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    Statute of Limitations has expired for period shown on SE-DPR no Form 843/Form 1040X was filed timely
    1. PROCESS AS CLASSIFIED WASTE if none are found.

    2. Destroy SE-DPR if the return was destroyed

      Reminder:

      In certain circumstances, a letter can be an informal claim for refund. You should review accounts for indications that correspondence may have been received that could qualify as a timely filed claim for refund.

    You receive a claim but no SSA SE-DPR
    1. Input TC 290–0 in appropriate blocking series to file claim pending receipt of SE-DPR.

    2. Acknowledge claim. Advise taxpayer no adjustment can be made until SSA SE-DPR is received. Taxpayer may contact SSA at:


    SSA
    Metro West
    300 North Greene Street
    13th Floor
    Baltimore, MD 21201
    Attn.: SPOSS/SE Determination Listings
    A conflict exists that may affect taxpayer's earnings record (e.g., MF records show taxpayer is no longer liable) or SSA SE-DPR is incorrect Note on SE-DPR and forward to appropriate SSA field office. If field office address is unavailable, use headquarters SSA office. Reference SSA contact name in "Rationale Field" of listing, if available.
    SE tax amount(s) on SSA SE DPR matches original return or no additional tax due if moved from primary to secondary tax payer Process as Classified Waste.
    Identity theft has been established with presence of TC 971 with AC 501, 504, 505, 506 or 522 Process as Classified Waste.
Statute Procedures for SSA SE-DPR
  1. If statute has expired for period shown on SE-DPR, and research shows no claim was timely filed, PROCESS AS CLASSIFIED WASTE.

  2. If statute expires within 90 days, follow Statute guidelines and hand carry SE-DPR to the Statute Unit.

Wage Determination Posting Records (AKA 7010)

  1. SSA sends Internal Revenue Service a Wage DPR when wages or tips to an employee (or a third party name holder) whose wages or tips have been:

    • omitted from their earnings record, or

    • reported erroneously/inaccurately,

      Note:

      These are BMF "E" transcripts only.

  2. A subsequent increase or decrease in FICA wages, resulting from information on this list, could result in an increase or decrease in FICA tax.

  3. An adjustment could lead an employer to request a refund of excess FICA taxes or paying additional FICA taxes.

Description of SSA Wage DPR
  1. Entity portion of listing contains following information:

    • NH Name (Number holder's)

    • SSN

    • ADD (address)

    • PHONE

    • ER NAME (Employer Name)

    • Employer contact name and phone number

    • Tax Period

    • Employment Type

    • EO/NR (Employee Omitted/No Record Indicator) "E" or "N" transcripts.

    • Net changes of the adjustment made

    • Total Earnings under Employer Identification Number (EIN) and Tax Year

  2. The fields of the Wage DPR are as follows:

    1. Net Change Wages field is the field that reports the net wages change.

    2. Net Change Medi field is the field that reports the net Medicare change.

    3. Net Change Tips field is the field that reports the net Tips change.

    4. The Basis for Change field defines what generated the change (e.g., W-2).

    5. The "Statute of Limitations" field is the SSA statute (not the IRS Statute). It will either read "apparent error" or is blank.

    6. The Tax Liability field will indicate whether there is a tax liability change or not (y or n).

    7. The Rationale field contains a more detailed explanation of the change.

  3. When reviewing SSA Wage DPR fields:

    If Then
    Amount in "Net Change" field is a positive number and type of action listed is "Add" or "Change"
    1. Subtract this figure from "Net Changes Wages" figure to determine previously posted earnings. (Example: Net Change = $567. New Detail Wages = $967.00, Previously posted earnings would be $400).

    2. This may result in an increase to FICA taxes due.

    Amount in "Net Change" field is a negative number (e.g., $1,800.00–) and type of action listed is "Delete" or "Change " 1. Add absolute figure to "New Detail Wages" figure to determine previously posted earnings. (

    Example:

    Net Change = $8,520.00– . New Detail Wages 0, Previously posted earnings would have be $8,520.00

    Note:

    This may result in a decrease in FICA taxes due.

    "New Detail Medicare/Net Change" field is a positive/negative number They are worked the same as procedures for "Net Change" (positive and negative) shown in this table to find previously posted amounts.
    "New Detail Tips Change" field is a positive/negative number They are worked the same as procedures for "Net Change" (positive and negative) shown in this table to find previously posted amounts.
    "Tax Liability Change" field reads "yes" (generally the case) FICA taxes may change.
    There is a conflict between SSA and Internal Revenue Service information Forward information to the SSA field office on the Wage DPR.
Statute Procedures for SSA Wage Listing
  1. If statute has expired for period shown on Wage DPR, and research shows no claim was timely filed, process as Classified waste.

  2. If statute expires within 90 days, follow Statute guidelines and hand carry Wage DPR to the Statute Unit.

Adjustments to Tax Based on SSA Findings
  1. Process tax adjustments as follows:

    If Then
    Employee wages decrease (a negative figure in "Net Change" field) and type of action listed is "Change" or "Delete"
    1. Advise employer of SSA's findings using Letter 2528C.

    2. Request employer correct its records if it agrees with findings.

    3. Employer should file an adjusted return on Form 941-X to correct the employee/employer FICA tax over reported on the Form 941 it filed.

    4. Suspense for a response and update CCA control to "S" status.

    Employee wages increase (a positive figure in "Net Change" field) and type of action listed is "Add" or "Change"
    1. Check for following information: Z Freeze: If a Z freeze code is found notate "Z Freeze " on transcript with TC 914, 916, or 918, attach ENMOD and TXMOD print and forward to Criminal Investigation Branch.

    2. TDI: If TDI 1 (open TDI) is found, forward to TDI. If TDI 2 (closed TDI) PROCESS AS CLASSIFIED WASTE.

    3. Transaction Codes:

      • TC 530 with CC 07,10

      • TC 590, 591, 598, 599, or 986 PROCESS AS CLASSIFIED WASTE.

      • TC 520 with CC 81, 82, 84, 86, 88, or 89 PROCESS AS CLASSIFIED WASTE. Status Code 71 forward to OIC. If Status Code 72 send to District Office of Document Locator Number (DLN) 520.

      • CNC: ENMOD "Currently Not Collectable " PROCESS AS CLASSIFIED WASTE.

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Processing Responses to SSA Findings
  1. Process responses as follows:

    If Then
    You receive a response (Form 941-X) decreasing Social Security and Medicare taxes Process in accordance with IRM 21.5Account Resolution and IRM 21.6 Individual Tax Returns and IRM 21.7 Business Tax Returns and Non MF.
    You receive a response that increases tax due Process in accordance with IRM 21.5 Account Resolution and IRM 21.7Business Returns and Non MF.
    Response indicates employee was reported under an erroneous SSN, a different TIN, or other account changes Verify on IDRS and PROCESS AS CLASSIFIED WASTE.
    You receive an original return Note on Wage DPR the return you have received, attach Wage DPR to return, and forward for processing.
No Response Received
  1. If no response is received, process as follows:

    If Then
    It is a potential refund case
    1. Stamp "No Reply" on copy of form letter.

    2. Attach form letter and Wage DPR to original case file and return to Return Files, or send to files as an attachment to refile DLN.

    There is no response and it involves potential additional assessment and affects one or more employee(s) (not including undeliverable mail) Process in accordance with IRM 21.5, Account Resolution and IRM 21.7 Business Returns and Non-Master File.
SSA - Indicated Problem Relating to a Return
  1. If problem relates to a return, examine SSA Wage DPR and original return. Process as follows:

    If And/Or Then
    Wage DPR is annotated "N" for no earnings record at SSA for employee Only additional information we can provide SSA is total payroll information on which FICA taxes were paid Do not correspond with SSA. PROCESS AS CLASSIFIED WASTE.
    Wage DPR is annotated "N" for no earnings record at SSA for employee We can provide additional information Note on Wage DPR and forward to SSA.
    Wage DPR indicates employee omitted income ("E" coded at SSA) There is an additional assessment, or return filed with Internal Revenue Service shows no FICA tax
    1. Inform employer of discrepancy found at SSA.

    2. Advise employer to submit payment if it agrees with proposed assessment or to advise Internal Revenue Service if information reported is incorrect.

    3. Process as Classified Waste.

    There is no record employer filed a return with Internal Revenue Service
    1. Prepare Letter 3802C to advise employer SSA has informed Internal Revenue Service of wages paid to an employee, but we have no record of a return.

    2. Instruct employer to file a return if it was not filed. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Undeliverable Procedures on SSA Findings
  1. Process as follows, undeliverable items for which you cannot locate a current address and have no record of a return filed:

    1. Research for TDA/TDI Assignment Code(s). If located, and there is an open TDI, annotate Wage DPR with assignment code and route to Campus Collection Operation.

    2. If there is no open TDI, annotate "No Reply TDI" . ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Route to the Campus Collection Branch.

Introduction to Religious Waivers

  1. The taxpayer will file either a Form 4361 or Form 4029 for social security and Medicare tax exemption.

  2. Upon legislation enacted by Congress for a specific period of time, taxpayers with an approved Form 4361 may file a Form 2031 to reverse their exempt status.

    Note:

    Congress has not provided such an election since 1999. Any Form 2031 generally should have been received by the due date of the 2002 individual income tax return. The Form 2031 indicator will remain on IDRS even though the form is now obsolete. If a taxpayer submits a Form 2031 in an attempt to reverse their exempt status, see IRM 4.19.6.4.11.1, Form 2031 General Guidelines.

  3. To determine whether a taxpayer is exempt from Social Security and Medicare tax, check IDRS. Find the Ministerial SE Code using CC IMFOLE. The display will show whether or not the taxpayer has filed for an exemption. It shows the "output code" as the "MINISTER SE CD." Check the value displayed on IMFOLE:

    • 1 = Form 4361 Approved

    • 2 = Form 4361 Denied

    • 3 = Form 2031 Processed

    • 4 = Form 4029 Approved

    • 8 = Form 4029 Denied

  4. IDRS CC SUMRY must be researched for an IDRS control of "SSA-" and IDRS Profile number beginning with 05846. If present, the taxpayer has filed and the application is being processed.

  5. The first correspondence to the taxpayer must be initiated within 14 business days of IRS receipt of Form 4361 or Form 4029. Cases become overage after 45 calendar days of IRS receipt.

    Note:

    If Form 4361 is received by FAX, a date stamp is required.

  6. Appropriate IAT/Quick Command Code (CC) Tools must be used when working cases where applicable.

Copies of Returns Exempt from Self-Employment Tax Received from Submission Processing

  1. When a copy of Form 1040 is received from Submission Processing (SP) with documentation indicating exemption from self-employment tax due to being a minister, Amish, etc. (Forms 4361 or 4029), research to verify exemption. If sufficient verification is found to support the exemption, update MINISTER-SE-TAX-EXEMPT-CD and administrative file using procedures in IRM 4.19.6.4, Introduction to Religious Waivers for Forms 4361 or IRM 4.19.6.5, Religious Waivers/Form 4029 for Form 4029.

    If Then
    If documentation is not sufficient to verify exemption:
    1. Correspond with taxpayer. Tell them we are updating our records and ask for a copy of their Form 4361, Form 4029, or other verification of their exemption.

    2. Suspend for 75 (60 to taxpayer, 15 for mail) days waiting for a response.

    If a response is received with sufficient documentation:
    1. Update the MINISTER-SE-TAX-EXEMPT-CD in the entity section on master file.

    2. Place in a permanent administrative file.

    If no response is received or insufficient information is provided:
    1. For a minister claiming Form 4361 exemption, refer the correspondence to Exam with a note that the taxpayer claimed exemption from self-employment tax and their return was processed, but insufficient evidence was provided.

    2. For an individual claiming Form 4029 exemption, follow guidelines in IRM 4.19.6.5, Religious Waivers/Form 4029.

    3. Attach all documentation to the most current tax return.

Minister Waivers — Form 4361

  1. Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, is submitted by:

    • duly ordained, commissioned, or licensed minister of a church or a member of a religious order (other than a member of a religious order who has taken a vow of poverty as a member of such order) or

    • a Christian Science practitioner

  2. To be approved the applicant must for reasons of either conscientious or religious principles, oppose the acceptance (with respect to services performed in his or her capacity as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance which makes payments in the event of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act).

General Guidelines for Form 4361

  1. Except as otherwise instructed, take the following actions when processing Form 4361:

    Note:

    Should an original, unprocessed Form 2848, Power of Attorney, or Form 8821, Tax Information Authorization, be enclosed in the case file, make a copy of the form to retain for the case file and notate on the copy "original forwarded for processing on MM/DD/YYYY" (the date sent). Forward the original Form 2848 or Form 8821 for processing per local procedures.

    If Then
    Applicant resubmits previously disapproved Form 4361 application See IRM 4.19.6.4.14, Previously Disapproved Form 4361.
    You receive correspondence related to Form 4361 Stamp the first page of the document with the received date.
    Form 4361 is attached to a tax return Detach the tax return from the Form 4361 and send it to the appropriate area for processing.
    The taxpayer indicates he/she is a member of a religious order under vow of poverty
    1. Neither approve nor disapprove application.

    2. Return Form 4361 to taxpayer with Letter 286C. Inform the applicant that they are automatically exempt from paying self-employment tax.

  2. Form 4361 are filed in triplicate . Maintain completed original copy of Form 4361 in a permanent file.

  3. You may send photocopies to Internal Revenue Service offices on request.

  4. Contact the Disclosure Help Desk at (866) 591–0860 or send an email to Disclosure@irs.gov if you have any questions about releasing the Form 4361 information.

  5. You may accept a timely filed letter in lieu of a timely filed Form 4361:

    • if it contains all required information, and

    • contain complete certification language as it appears on Form 4361.

  6. Complete all Campus research and processing before sending correspondence other than declaration letter described in IRM 4.19.6.4.5, Response to Request for Taxpayer's Declaration. This allows you to identify other items that are needed in order to process the Form 4361. This research includes checking both the online CAF (IDRS Command Code CFINK) and the RAF (IDRS Command Code RFINK) as well as the paper file for either the Form 8821 or the Form 2848 to ensure that copies of all letters go to the taxpayers representative.

  7. Input all necessary information in query database from the Form 4361 paper documents.

Criteria for Approving Form 4361

  1. Five criteria must be satisfied before application is approved:

    1. Application must be filed timely.

    2. Application must be complete (i.e., Bylaws, Certificate or license, and list of sacerdotal duties)

    3. Ordaining organization must qualify for exemption (i.e., Church or Denomination Exemption Letter or written letter from the Church stating they are exempt under the specific Internal Revenue Code section applicable.)

    4. Minister has not filed a Form 2031.

    5. Minister must sign and return declaration verifying he/she is aware of grounds for exemption.

    Note:

    If the taxpayer cites any Internal Revenue Code (IRC) section or Revenue Procedure as a reason to overturn a disallowance of an exemption from Self Employment Tax, and that Code Section or Revenue Procedure is not within the normal area of Minster Waiver issues, send Form 4361 to Classification in Examination as a technical question following established procedures.

    Note:

    Search IDRS for record of Form 2031, Waiver Certificate For Use by Ministers, Certain Members of Religious Orders, and Christian Science. If no record, initiate a search of Internal Revenue Service permanent files and SSA for a Form 2031 filed in 1986 or subsequent. Form 2031 is obsolete as of March 2004, unless Congress establishes another period after 2004 to use this form to revoke the tax exempt status.

  2. Ensure that applicant understands grounds for exemption by issuing Letter 287C containing a declaration section to meet Internal Revenue Service verification requirements.

Response to Request for Taxpayer's Declaration

  1. Take the following actions based on taxpayer response to Letter 287C:

    If Then
    Taxpayer signs and returns declaration within the initial suspense period Continue processing using steps in IRM 4.19.6.4.4, Criteria for Approving Form 4361, IRM 4.19.6.4.5, Response to Request for Taxpayer's Declaration and IRM 4.19.6.4.6, Was the Application Timely?
    Taxpayer returns a signed and dated declaration and states he/she would like to discontinue processing of Form 4361 (only the box to discontinue is checked)

    Note:

    If the taxpayer checks both boxes of the declaration statement, request another Letter 287C declaration to determine taxpayer's intent. Taxpayer must mail the corrected copy back.

    1. Attach Letter 287C declaration to the originalForm 4361 for historical files.

    2. Return all copies of Form 4361 and associated documents to the taxpayer.

    3. If a certified mail receipt ( Letter 286C ) is in the file attach it to the retained Form 4361

    Note:

    When scanning is available, all three of these items will need to be scanned into the file.

    A subsequent request for a declaration letter is received from a taxpayer because he/she did not receive Letter 287C
    1. If request is received within initial 90 day period, send taxpayer another declaration. Signed declaration must be mailed within initial 60 day period to be timely.

    2. If request is mailed after initial 90 day period, advise taxpayer that exemption is effective on date Internal Revenue Service receives declaration.

Was the Application Timely?

  1. Form 4361 must be filed by the due date (including any extensions) of the income tax return for the second taxable year in which applicant has self-employment income of $400 or more, any part of which was from the performance of services in the exercise of his ministry. For example, M was ordained a minister in November 2013. M had net earnings from self-employment of $1,000 in 2014 and $1,500 in 2015, some part of which was from service performed in the exercise of his ministry in each year. Form 4361 was due when the 2015 individual income tax return was due, April 15, 2016.

    Note:

    Although generally individual income tax returns must be filed April 15, taxpayers who live outside the U.S. and Puerto Rico on the due date and whose main place of business is outside the U.S. and Puerto Rico receive an automatic extension of two months (until June 15 for calendar year filers).


    Note:

    Housing allowances are considered self-employment income. See IRC Section 1402(a)(8).

    Note:

    If Form 4361 is received by FAX, a date stamp is required.

  2. Taxpayer enters years he/she has earnings from self-employment of $400 or more on Line 5 of Form 4361. It is possible only one entry will be made, or entry may not be for a recent year. For example, if a minister is ordained in 2012 and has net earnings from self-employment of $1000 in 2012, but has not worked as a minister since then, application could still be timely.

  3. A minister may apply for exemption from self -employment tax upon changing churches and beliefs. A minister who is ordained by a second church and who previously was not conscientiously opposed to the acceptance of public insurance can qualify for the self-employment tax exemption, by claiming exemption within the prescribed period after the second ordination.

    Example:

    S, an ordained deacon by Denomination X, had net self-employment income, including ministerial income, $400 or more in both 2010 and 2011. The taxpayer's activities as a deacon made him potentially eligible to apply for an exemption. Due to his beliefs and that of his church, S was not eligible and did not apply for an exemption. He left the ministry, obtaining employment outside of his ministry. In 2013, he was ordained by another denomination, denomination Y. S developed a belief in opposition to the acceptance of public insurance. S may qualify for the self-employment tax exemption, by claiming exemption within the prescribed period after the second ordination.

  4. In reviewing Line 5 of Form 4361, take the following actions:

    If And Then
    There are two dates Later year is not current (due date with extensions has expired) Disapprove per IRM 4.19.6.4.13, Disapproving Form 4361, of this section.
    There are two dates Later is current Proceed to IRM 4.19.6.4.7, Is Form 4361 complete? of this section.
    There is only one date Date is current Proceed to IRM 4.19.6.4.7, Is Form 4361 Complete? of this section.
    There is only one date Date is not current
    1. Research account to determine if self-employment income of $400 or more has been reported since Line 5 year.

    2. If not, proceed to IRM 4.19.6.4.7, Is Form 4361 Complete? of this section.

    3. If so, correspond with taxpayer to determine nature of self-employment income.

    4. If response indicates income was not ministerial income, proceed to IRM 4.19.6.4.7, Is Form 4361 Complete? of this section.

    5. If there is an indication that there was ministerial income or there is no response, disapprove Form 4361 per IRM 4.19.6.4.13, Disapproving Form 4361. of this section.

    Reminder:

    IDRS CC:IRPTRO provides the gross income, not the net income. Therefore, check Form 1040 Schedule C for net income for Ministerial earnings/income on IDRS CC:RTVUE.

  5. If Form 4361 is not received timely, disapprove the application. See IRM 4.19.6.4.13, Disapproving Form 4361, for additional information.

    Note:

    If the Application was disapproved due to untimely filing, inform the taxpayer that there are no Appeal Rights. See IRM 4.19.6.4.17, Appeals and Refunds Related to Form 4361, for more information.

Is Form 4361 Complete?

  1. Consider Form 4361 complete under the following circumstances:

    1. Line 1 must be complete. Research for SSN. If not found, correspond with taxpayer.

    2. Line 2 can only have one box checked. If taxpayer is applying as a commissioned or licensed minister of a denomination that also ordains ministers, check line 6 for an entry and for an attachment containing the bylaws or articles or constitution.

    3. Line 3 must be completed (month, day, year). If date on Line 3 is after earliest date on Line 5, consider Line 3 incomplete. A copy of an ordination/license certificate or a letter from the organization must be attached.

      Exception:

      Line 3 is within last two years or later date on Line 5 is within one year. Then accept it as filed.

      Note:

      If taxpayer states in an authorized letter that their ministerial position is a Reader, accept as a substitute for certificate, if confirmation date matches Line 3 on Form 4361. Consider as an ordained minister, priest or rabbi and request for Declaration statement.

    4. Line 4 should be completed. However, if just EIN is missing, research using CC NAMEE. If it cannot be found, or more than EIN is missing, correspond with taxpayer.

    5. Line 5 must be completed. If not correspond with taxpayer using Letter 287C. Exception: Taxpayers may file Form 4361 before the due date of the income tax return for the second year in which they have self-employment earnings of $400 or more, part of which are from ministerial duties.

      Example:

      Taxpayer E has self-employment earnings of $500 from ministerial duties in 2013 (Tax Year 2013). In January of 2014 (Tax Year 2014) the taxpayer has self-employment earnings of $450 from ministerial duties. The taxpayer may file Form 4361 at this time.

    6. Line 6 should have an entry if "Commissioned or Licensed Minister" is checked on line 2. However, Line 6 may be N/A or blank if the denomination does not ordain ministers. If the taxpayer was not ordained, consider all available facts including whether they are licensed or commissioned. Taxpayer must perform ministerial duties to qualify for tax treatment as a minister. Ministerial duties include: the performance of sacerdotal functions, such as Marriages, Baptisms, Funerals and Holy Communion, as well as the conduct of religious worship, the performance of services in the control, conduct and maintenance of religious organizations. (Treas. Reg. 1.1402(c)-5(b)(2)). Whether the church or denomination recognizes the taxpayer as a religious leader has also been considered indicative. See Knight v. Commissioner, 92 T.C. 199 (1989); Wingo v Commissioner, 89 T.C. 922 (1987).

    7. Line 7 must be signed and dated. If statement is altered, it may indicate taxpayer is not requesting exemption for religious reasons. If alteration indicates request is for economic reasons (e.g., "I have paid into Social Security for 10 years so I want to stop now" ), deny application using procedures in IRM 4.19.6.4.13, Disapproving Form 4361 Forward a copy of Form 4361 to Exam to support tax assessments or adjustments.

      Note:

      All statute imminent returns are reviewed for possible assessments of self-employment tax by Examination function prior to referring to Criminal Investigation.

    8. If an item above is incomplete after corresponding with taxpayer, disapprove per IRM 4.19.6.4.13, Disapproving Form 4361 Otherwise, proceed to IRM 4.19.6.4.8, Does the Organization Qualify?.

  2. If Form 4361 is not complete:

    1. Return the form to the taxpayer using Letter 287C with paragraph 0 (zero).

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    If Then
    The taxpayer returns a completed Form 4361 within the suspense period, Mark the form as timely filed.
    The taxpayer does not respond within the suspense period, Disapprove the Form 4361 using the procedures in IRM 4.19.6.4.13, Disapproving Form 4361.

    Note:

    If you receive a reply after the ≡ ≡ ≡ suspense period has expired and the response was received by IRS within the ≡ ≡ ≡ ≡ suspense period, you must use the information in determining whether to approve the Form 4361 or not.

Does the Organization Qualify?

  1. To qualify for exemption, the minister must be ordained, licensed, or commissioned by an organization that:

    • Can qualify as exempt from income tax under IRC 501(a) as a religious organization described in IRC 501(c)(3) , and

    • Can establish it is a church, convention, or association of churches described in IRC 170(b)(1)(A)(i)

    Note:

    The religious organization does not need to have filed Form 1023, Application for Recognition of Exemption Under IRC Section 501(c)(3). It only needs to show that it would qualify if requested. Form 8123, Questions Regarding Status as a Church, is no longer used by field offices. If Form 8123 is received, it should be associated with Form 4361 file. If there is no Form 4361 file, destroy Form 8123.

  2. A copy of exemption letter issued to organization by Internal Revenue Service, or a letter signed by an individual authorized to act for organization, stating organization meets requirements is sufficient to establish organization qualifies. If this information is not attached, correspond or research as (3) below indicates.

  3. Research Line 4 information on EO/BMF using CC INOLE to verify tax exempt status of ordaining religious organization. Use all available research tools as well.

  4. Status Code must be 01 or 02 and foundation code must be 10 or 15 using available research in (3) above. Then:

    If Then
    Organization is found and codes match Proceed to IRM 4.19.6.4.7, Is Form 4361 Complete? of this section.
    Organization is found and codes do not match Disapprove per IRM 4.19.6.4.13, Disapproving Form 4361. of this section.
    Determination cannot be made after research and/or contact Disapprove per IRM 4.19.6.4.13, Disapproving Form 4361. of this section.

Qualifying Organizations

  1. To process Forms 4361 , you need to know the status of the religious organization. If that organization qualifies, approve application if other criteria are satisfied.

    If the taxpayer’s organization falls under the umbrella of a broader organization (i.e. Baptist Churches in the United States) and the taxpayer’s organization does not have an EIN, the taxpayer will not be required to have an entry in line 4 (EIN) of Form 4361. See below for the cumulative list of organizations described in IRC 170(c).

    Note:

    Foreign organizations listed on line 4 are not required to have an EIN on Form 4361. This does not mean they are exempt. You will work these Form 4361 in the same manner as any other forms received.

    Note:

    If the taxpayer submits an IRS letter accepting them under the IRC Section 501(c)(3) and IRC Section 170 (b)(1)(A)(i) and the codes on IDRS do not reflect the exemption, accept the letter as proof of exemption, regardless of date of the letter.

  2. If organization on Line 4, Form 4361, is included in the following list, consider it as qualifying:

    • Apostolic Lutheran Churches and Congregations in the United States

    • Baptist Churches in the United States

    • Catholic (Roman) Churches in the United States, its territories, and possessions

    • Christian Reformed Churches in the United States

    • Christian Science Churches

    • Congregational Churches in the United States

    • Episcopal Churches and Dioceses in the United States

    • Evangelical Lutheran Church in the United States, its Synods and local churches

    • Church of the Nazarene, in the United States

    • Holy Church of God and its subordinate local churches

    • Assemblies of God in the United States

    • Jehovah's Witnesses in the United States

    • Jewish Congregations, Synagogues, Temples and Seminaries

    • Methodist Episcopal Churches in the United States

    • Nazarene Churches in the United States

    • Protestant Episcopal Churches and Dioceses in the United States

    • Quakers (Friends) Churches

    • Unitarian Universalist Churches in the United States

    • United Methodist Church in the United States

    • Presbyterian churches in the United States

    • Greek Orthodox Archdiocese of North and South America, Inc.

    • General Council of the Christian Church of North America

    • Church of Jesus Christ of Latter Day Saints

    • Church of Christ in the United States

    • Church of Scientology

Processing Forms 4361 Filed by Ministers of Church of Scientology
  1. Use the following guidelines to approve applications from ordained ministers from this church:

    1. Form 4361 by these ministers must include an ordination certificate or letter from the governing body of church establishing the individual as an ordained minister.

    2. For purposes of determining if Form 4361 is timely filed, October 1, 1993 is considered the date of ordination for ministers ordained on or before that date. Ministers who file on a calendar year basis are considered to be timely filed if the form is filed by April 15, 1995, or the due date of the income tax return for the second taxable year (including extensions) in which he or she had net earnings of $400 or more that included earnings from ministerial services.

  2. If Scientology minister filed a Form 4361prior to October 1, 1993, process as follows:

    If Then
    Previous application was denied Instruct minister to prepare a new Form 4361.
    Previous application was approved No further action is needed.
  3. Follow usual procedures for ministers ordained after October 1, 1993.

Religious Orders

  1. Rev. Proc. 91–20, 1991–1 C.B. 524 , provides guidance in determining whether an organization constitutes a "religious order" under the IRC. Remuneration for services performed by members of qualified religious orders in the exercise of duties required by their orders may be exempt from FICA tax, self-employment tax and federal income tax withholding. If the member is required to take a vow of poverty, the services are exempt from FICA tax (unless the religious order elects coverage under IRC 3121(r) and self-employment tax. If the member is not required to take a vow of poverty, the services are subject to self-employment tax unless Form 4361 is filed and approved.

  2. The term "religious order" is not defined in the Code or Regulations. Organizations and individuals may request rulings from the Service on whether they are religious orders, or members of a religious order, for FICA, self-employment and federal income tax withholding purposes by following procedures in Rev. Proc. 20XX–4 (which is updated annually). Also, individuals may apply for exemption from self-employment tax as members of religious orders by filing Form 4361. The form is processed as follows:

    If Then
    Taxpayer files a Form 4361 stating he/she is a member of a religious order along with a copy of a private letter ruling issued by the Service stating organization is a religious order That is sufficient evidence that organization is a religious order.
    Taxpayer files a Form 4361 stating he/she is a member of a religious order without a private letter ruling
    1. Determine whether taxpayer is a member of a qualified religious order using criteria below from Rev. Proc. 91–20.

      Note:

      See IRM 4.19.6.4.8(3), Does the Organization Qualify?

    2. If taxpayer has not provided the following information, inform taxpayer of guidelines in Rev. Proc. 91–20 and immediately request taxpayer to either provide a private letter ruling or give detailed information according to the following criteria:

      1. the organization is described in IRC section 501(c)(3).

      2. The members of the organization vow to live under a strict set of rules requiring moral and spiritual self-sacrifice and dedication to the goals of the organization at the expense of their material well-being.

      3. The members, after successful completion of the organization's training program and probationary period, make a long-term commitment to the organization (normally more than two years).

      4. The organization is, directly or indirectly, under the control and supervision of a church or convention or association of churches, or is significantly funded by a church or convention or association of churches.

      5. Members normally live together as part of a community and are held to a significantly stricter level of moral and religious discipline than required of lay church members.

      6. Members work or serve full-time on behalf of the religious, educational, or charitable goals of the organization.

      7. Members participate regularly in activities such as public/private prayer, religious studies, teaching, care of the aging, missionary work, church reform/renewal.

    Note:

    If taxpayer is a missionary worker or a member of Campus Crusades For Christ, they may not perform certain duties, except as qualifying under the guidelines.

  3. Generally:

    If Then
    An organization meets all of the criteria in the previous if/then chart The organization is a religious order.
    An organization does not have characteristics as described in IRC 501(c)(3) The organization cannot be a religious order.
    An organization has characteristics as described in IRC 501(c)(3) , but does not have all of the other characteristics as described by Rev. Proc. 91–20 The organization may be a religious order. Consider all facts and circumstances before making a determination.

    Note:

    If you are still unsure whether an organization is a religious order, consider contacting the parent organization of church affiliation for its views on its qualification as a religious order. Carefully consider these views.

Form 2031 — Election Back into Social Security Coverage

  1. The Tax Relief Extension Act of 1999, Public Law 106–170 provided a limited period, during which ministers, certain members of religious orders, and Christian Science practitioners, who have an approved Form 4361 in place for tax year 1999, could file Form 2031, Waiver Certificate for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners. This is an irrevocable election back into Social Security and Medicare coverage for their ministerial earnings. This opportunity does NOT apply to Form 4029 filers. Congress provided a similar limited time for ministers as a part of Tax Reform Act of 1986 for tax years 1986 and 1987. Form 2031 was also used for this period.

    Note:

    Congress has not provided such an election since 1999. Unless Congress passes a similar act, any Form 2031 generally should have been received by the due date of the 2002 individual income tax return. The Form 2031 indicator will remain on IDRS even though the form is now obsolete. This form may be reactivated for use if Congress passes a law to allow taxpayers to opt out of the exemption.

  2. If a Minister elected before 1968 to be covered under Social Security for their ministerial services they cannot file for an exemption from self employment tax. Therefore Form 2031 would not apply to these individuals.

Form 2031 General Guidelines
  1. If a taxpayer submits a newly completed Form 2031, Waiver Certificate For Use By Ministers, Certain Members of Religious Orders, and Christian Science Practitioners:

    1. Date stamp Form 2031 or correspondence regarding Form 2031. Enter "postmark date" in the bottom portion of the form and staple the envelope (or postmark portions of an oversized envelope) to the form.

    2. Verify the indicator for the "MIN-SE-TX-EXEMPT-CD" field on IDRS CC:IMFOLE.

    If Then
    a value of "3" is displayed,
    1. Return the Form 2031 to the taxpayer using Letter 315C.

    2. Include an open paragraph that explains the taxpayer already has an approved Form 2031 on file and that the election is irrevocable.

    any other value is displayed,
    1. Return the Form 2031 to the taxpayer using Letter 315C.

    2. Include an open paragraph and explain there is no longer legislation in place that allows for revocation of exemption from self-employment tax using Form 2031, Waiver Certificate for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, and that their exemption from self-employment tax is still valid.

  2. If an original tax return is received attached to Form 2031, detach the return and forward it for processing.

  3. This exemption does NOT apply to filers of Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.

Approving Form 4361

  1. Generally, if all five criteria are met (see IRM 4.19.6.4.4, Criteria for Approving Form 4361 for more information), approve application. Process approval as follows:

    1. Stamp with the Director's signature. Mark the box "approved" on all three copies of Form 4361 in the section titled, "For Internal Revenue Service Use" .

    2. Date all copies to agree with date entered on the declaration statement. If the declaration statement received date is after a previous determination, use the correspondence IRS received date on all three copies.

    3. Return an approved copy to SSA.

    4. Return a copy to the taxpayer using Letter 398C. Instruct taxpayer to retain approval documentation indefinitely.

    5. Place original copy in permanent file.

  2. Exemption begins at ordination or commissioning if Letter 287C declaration was signed and mailed within the initial time frame allocated in the correspondence issued to the taxpayer.

  3. If declaration is not mailed within the time frame allocated in the correspondence issued to the taxpayer, see IRM 4.19.6.4.13, Disapproving Form 4361.

Disapproving Form 4361

  1. The Form 4361 will be disapproved when:

    1. Any of the five criteria described in IRM 4.19.6.4.4, Criteria for Approving Form 4361, are not met.

    2. The Form 4361 was not submitted timely. See IRM 4.19.6.4.6, Was the Application Timely?, for additional information.

  2. Take the following actions when disapproving the Form 4361:

    1. Notate and mark box "disapproved" in the section For Internal Revenue Service Use, on all three copies of Form 4361.

    2. Stamp the Director's signature and date on all three copies.

    3. Place the original copy in permanent files.

    4. Send a copy to SSA.

    5. Return a copy to the taxpayer as an enclosure to Letter 286C. You must circle out all "received dates" on the taxpayer’s copy of Form 4361.

    6. Include an open paragraph on Letter 286C using the following verbiage as an example: "If you have additional information that you want us to consider, please submit a new signed application. Include all additional information relevant to your new claim with a newly completed Form 4361."

      Reminder:

      If the application was disapproved due to untimely filing, inform the taxpayer that there are no Appeal Rights.

    7. Update IDRS with the applicable actions. See IRM 4.19.6.4.18, MINISTER-SE-TX-EXEMPT-CD Form 4361, for additional information.

  3. DO NOT disapprove the Form 4361 due to non-receipt of declaration. Keep suspense file open pending receipt of declaration, taking following actions as needed:

    If Then
    No response is received from taxpayer within 105 (90+15) days of initial correspondence
    1. Make a copy for local suspense file.

    2. Circle out all received dates.

    3. Return Form 4361 to taxpayer unprocessed using Letter 286C advising taxpayer that no action will be taken on application until necessary information is received.

    4. Close suspense control base.

    Note:

    In order for IRS to consider the application, it must be timely filed, without exception. Requests that are not timely filed will not be considered and the requested exemption will not be granted.

Previously Disapproved Form 4361

  1. If the taxpayer re-submits a previously disapproved Form 4361 (i.e., stamped “disapproved” under "For Internal Revenue Service Use" ) with additional information, return the Form 4361 and any additional information provided to the taxpayer with Letter 287C. Advise the taxpayer to submit a new signed Form 4361 with the additional information.

  2. If the taxpayer submits a new Form 4361 application because the previous application was disapproved, review the disapproved Form 4361 as part of the evaluation of the new application.

    If Then
    No new information is provided or the information provided with the new Form 4361 is the same as the previously disapproved application. Disapprove the new Form 4361. See IRM 4.19.6.4.13, Disapproving Form 4631, for additional information.
    The taxpayer provides new and/or additional information Consider application on its own merits. If it meets all necessary criteria, approve application.

    Caution:

    Carefully review and research the new information to determine its validity.

Revocation of Exemption - Economic Considerations (Form 4361)

  1. Generally, once an exemption has been granted, it is irrevocable. However, if it becomes evident that application was made solely for economic considerations rather than religious opposition, then Rev. Rul. 70–197 allows for revocation.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Procedures to Revoke Exemption - Economic Considerations (Form 4361)
  1. If Then
    The taxpayer requests a revocation of his/her exemption because application was made solely for economic considerations rather than religious opposition,
    1. Advise taxpayer that exemption has been revoked because it was originally based on economic considerations.

    2. Notify SSA and forward copies of all material related to revocation.

    3. Refer case to Examination function for assessment of tax.

    4. Associate all material related to revocation with a copy in the permanent file, noting change.

  2. If application was not made solely for economic considerations, process request for revocation as follows:

    If Then
    Original copy is in permanent file Advise taxpayer that it is irrevocable.
    Original copy is not in permanent file
    1. Check open cases.

    2. If found, return application to taxpayer with no further action.

    Original copy is not in either permanent file or open cases 1. Send a request to SSA for verification of exemption.
    2. Once verified, advise taxpayer exemption is irrevocable.
    3. Send a copy of letter and taxpayer's request to the campus that issued original exemption.
  3. In all cases, attach a copy of the request and a copy of our letter to the original copy in the permanent file.

When Taxpayer Claims Form 4361 Previously Approved — Internal Revenue Service Has No Record

  1. When a taxpayer indicates Form 4361 was previously filed, but the Internal Revenue Service has no record of it, research history file for Form 4361 MF indicator for approved or disapproved code. If necessary take the following actions:

    1. Contact SSA for a copy of the Form 4361.

    2. If SSA responds they do have an approved exemption, process the copy from SSA as approved.

    3. If SSA responds they do not have an approved exemption, instruct taxpayer to forward a new Form 4361 and/or a copy of their duplicate approved exemption. If a copy of approved exemption is received, process it as approved.

    4. Process reapplication, except for timeliness criteria. Determine if exemption was allowed on prior year returns, either through normal processing or examination. If an assessment is necessary forward a copy to Examination .

    5. Disallow reapplication for exemption as not being timely if taxpayer has not claimed exemption previously or Examination function specifically disallowed exemption because taxpayer did not qualify.

    Note:

    Taxpayer bears burden of providing information or verification concerning previously filed Form 4361 . An affidavit stating application was filed previously is not sufficient to grant an exemption. Minister must show that he/she was eligible at time of filing the previous form.

Appeals and Refunds Related to Form 4361

  1. A minister who is granted exemption may file a claim for refund of payments paid prior to his/her exemption if they are still within their statute of limitations.

  2. There are no "appeal rights" to the Form 4361 election decision. A minister may use normal appeal rights to an assessment of tax.

MINISTER-SE-TX-EXEMP-CD Form 4361

  1. Enter IDRS CC ENMOD, followed by CC:ENREQ, which becomes CC:INCHG, which indicates "MIN-SE-TX-EXEMP-CD" , using TC 016, Doc Code 63 for each approved or disapproved Form 4361. If TC 000 is also being input, cycle in TC 016 with one cycle delay.

  2. Input appropriate code as follows:

    • 1 - Form 4361 Approved

    • 2 - Form 4361 Denied

    • 9 - To reverse an entry (returns MF setting to 0)

  3. Input code on SSN belonging to Form 4361 applicant, even if that person is the secondary filer (i.e., joint return). Code is then reflected on entity of SSN of taxpayer who was considered on Form 4361. This is important if taxpayer later files alone or with another spouse.

Religious Waivers /Form 4029

  1. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits, is used by members of certain religious groups (primarily Amish and Mennonites) to apply for exemption from Social Security and Medicare taxes because of their religious beliefs. An individual waives all rights to Social Security benefits under Titles II and XVIII of the Social Security Act. Exemption is for individuals, partnerships (if all partners have approved certification), and employers (if the employer has an approved certification).

  2. IRC Sections 1402(g) and 3127 authorize this exemption process. There are no "appeal rights" to the Form 4029 election decision. A taxpayer may use normal appeal rights to protest an assessment of tax.

Form 4029 — Procedures

  1. Form 4029 is first filed with SSA, which determines whether the religious sect or division meets requirements for exemption from Social Security and Medicare taxes. SSA then forwards Form 4029 to the Philadelphia Campus (centralized Internal Revenue Service processing site for these forms) which is responsible for ensuring the taxpayer is a member of the sect or division and that the taxpayer waived all benefits and other payments under Titles II and XVIII of the Social Security Act.

  2. Date-stamp all Form 4029 received and take the following actions:

    If And Then
    Form 4029 is received SSA approval block is not completed Immediately forward Form 4029 to:
    Social Security Administration
    P.O. Box 7
    Boyers, PA 16020
    Form 4029 is received in a Campus other than PSC SSA block is completed Immediately forward Form 4029 to:
    Philadelphia Campus 4-G08,151
    2970 Market St
    Philadelphia Pa. 19104
    Form 4029 Process
    Imminent statute situation exists Form 4029 needs to go to SSA and earnings are indicated for a year other than current one Review for possible assessment of SE tax prior to forwarding to SSA address above.
  3. Taxpayers waiting on a Form 4029 approval must inform their employers to continue to withhold and pay their share of Social Security and Medicare taxes.

  4. Review altered Form 4029 for possible assessment of SE tax on imminent statute returns, then forward to Criminal Investigation (CI). Also, send a copy of all Forms 4029 involving a "vow of poverty" or list an organization suspected of being a "mail order ministry" to CI.

  5. For employer and employee submissions, the effective date is the first day of the first quarter after the quarter in which the application was filed. It lasts as long as both employer and employee continue to meet requirements. Exemption is effective for non-employee individual for the first year that the taxpayer met the requirements.

  6. Note on all copies of Form 4029 whether application is approved or disapproved and stamp/date with Director's signature. Distribute copies of completed Forms 4029 as follows:

    1. Send a copy to applicant.

      IF THEN
      The Form 4029 is approved Return to applicant with approval Letter 398C.
      The Form 4029 is disapproved
      1. Circle out all received dates on the copy of the Form 4029.

      2. Return to applicant with disapproval Letter 401C via certified mail.

    2. Forward one copy to SSA.

    3. Maintain original copy in the case file.

  7. Input all necessary information in query database from the Form 4029 paper documents.

Forms 4029 with Missing or Incorrect SSNs

  1. Form 4029 exemption status does not affect requirement to furnish a valid TIN. Taxpayers who qualify may write "Amish" or "Exempt- Form 4029" in SSN area on Form 1040 . When you receive Forms 4029 with this notation in SSN area, send to Entity Control function to establish a temporary SSN per IRM 3.13.5, Individual Mater File (IMF) Account Numbers, before processing.

  2. If Form 4029 is received from SSA indicating SSN is not available or is incorrect, take actions in (1) above.

    1. Research to locate correct SSN or correspond with taxpayer using Letter 401C (do not refer to an SSN or send a Form SS–5).

    2. Suspense a copy of letter for 45 days.

    3. If no reply, send a follow-up letter to taxpayer.

    4. When information is received, forward it to SSA for issuance of an SSN.

    5. When SSN received from SSA, enter it onto Form 4029.

    6. Advise taxpayer to use this SSN on all future filings.

    7. Send to Entity Control to merge taxpayer's existing account with new SSN, if necessary.

Forms 4029 with Missing or Incorrect Information

  1. Process Forms 4029 with missing, incomplete, or incorrect information as follows:

    If Then
    Significant data, other than certification by Religious Group-SSA-1458, is missing. Return Form 4029 to applicant using Letter 401C, requesting applicant complete and return same Form 4029.
    Form 4029 is signed by both spouses. A printed signature is considered valid for this form. A stamp cannot be used as a signature Return Form 4029 to applicants using Letter 401C , requesting them to submit separate applications and return original form.
    Applicant indicates he/she does not belong to any religious group or modifies Form 4029 to show he/she does not oppose one or more of types of insurance specified Disapprove application.

Loose Forms 4029

  1. Occasionally, loose Forms 4029 are received. When this occurs, follow the instructions below:

    If And Then
    A loose copy of a previously approved or disapproved Form 4029 is received, SE tax needs to be assessed or abated and no open controls and recent tax adjustments are present, send to Exam to have the adjustment input.
    A loose copy of a previously approved or disapproved Form 4029 is received, an approved Form 4029 was attached to a Form 1040 to support the exemption, take no action.
    A loose copy of a previously disapprovedForm 4029 is received,
    1. Review returns for open statute years for assessments.

    2. Send it to Examination if an assessment is needed.

Form 4029 — Revocation/Withdrawal

  1. When an individual signs Form 4029 the jurat criteria includes an agreement that the individual will notify the Internal Revenue Service within 60 days of any event that results in the individual leaving the religious group described in the Form 4029 , or in the individual disavowing the established teachings of the group. You may receive correspondence or a copy of the Form 4029 from the taxpayer attempting to meet this requirement.

  2. Process the request as follows:

    1. Research IDRS to verify entity.

    2. Input TC 016 to change the MIN-SE-TX-EXEMP-CD to 0.

    3. Notify taxpayer via Letter 401C using the appropriate paragraph.

    4. Notate incoming correspondence with action taken and make one copy.

    5. Attach original correspondence to Form 4029 in file.

    6. Send a copy of the Letter 401C and correspondence to SSA.

MINISTER-SE-TX-EXEMP-CD-Form 4029

  1. Enter IDRS CC ENMOD, followed by CC ENREQ, which becomes CC INCHG which indicates MIN-SE-TX-EXEMP-CD, using TC 016, Doc Code 63 for each approved or disapproved Form 4029. If TC 000 is also being input, cycle in TC 016 with one cycle delay.

  2. Determine and input the appropriate code as follows:

    1. TC 016 input value of “3 = approved.” This transaction will allow the indicator on IDRS for the account to become a “4 = Form 4029 approved.”

    2. TC 016 input value of “4 = disapproved.” This transaction will allow the indicator on IDRS for the account to become an “8 = Form 4029 denied.”

    3. TC 016 input value of “9 = reverse entry.” (returns MF setting to 0).

  3. Input code on SSN of Form 4029 applicant, even if person files as secondary filer with another number. Code is then reflected on entity of the applicant in case the taxpayer later files alone or with another spouse.