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Publication 517 Cat. No. 15021X Contents

Future Developments ...... 1 Department of the Security What's New ...... 1 Treasury Internal Reminders ...... 2 Revenue and Other Service Introduction ...... 2 for Social Security Coverage ...... 3 Members of the Ministerial Services ...... 4 Exemption From Self- and (SE) ...... 6 Self-Employment Tax: Figuring Net Religious Earnings ...... 7 Tax: Income and Expenses .... 9

Workers Filing Your Return ...... 11

Retirement Savings Arrangements ... 11 For use in preparing Earned Income (EIC) ...... 12 Worksheets ...... 14 2020 Returns How To Get Tax Help ...... 15

Index ...... 18

Future Developments For the latest information about developments related to Pub. 517, such as legislation enacted after this publication was published, go to IRS.gov/Pub517.

What's New Tax relief legislation. Recent legislation pro- vided certain tax-related benefits, including the election to use your 2019 earned income to fig- ure your 2020 earned income credit. See Elec- tion to use -year earned income for more information. for self-employed individuals. New refundable credits are available to certain self-employed individuals impacted by the coro- navirus. See the Instructions for Form 7202 for more information. Deferral of self-employment tax payments under the CARES Act. The CARES Act al- lows certain self-employed individuals who were affected by the coronavirus and file Schedule SE (Form 1040), to defer a portion of their 2020 self-employment tax payments until 2021 and 2022. The self-employment tax pay- ments eligible for deferral must be attributed to the period March 27, 2020, through December 31, 2020. The deferral is calculated and repor- Get forms and other information faster and easier at: ted on Part III of Schedule SE (Form 1040). For • IRS.gov (English) • IRS.gov/Korean (한국어) more information, see Schedule SE (Form • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) 1040) and its instructions. • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt) Standard mileage rate. The business stand- ard mileage rate for 2020 is 57.5 cents a mile.

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Earnings subject to social security tax. For In addition, all wages and self-employment 2020, the maximum wages and self-employ- Introduction income that are subject to Medicare tax are ment income subject to social security tax has subject to a 0.9% Additional Medicare Tax to increased to $137,700. Three federal are paid on wages and the extent they exceed the applicable threshold self-employment income—, social for an individual's filing status. Medicare wages Modified adjusted (AGI) limit security tax, and Medicare tax. Social security for traditional IRA contributions. For 2020, and self-employment income are combined to and Medicare taxes are collected under one of determine if income exceeds the threshold. A you may be able to take an IRA deduction for two systems. Under the Self-Employment Con- your contributions if you were covered by a re- self-employment loss isn't considered for pur- tributions Act (SECA), the self-employed per- poses of this tax. Railroad retirement (RRTA) tirement plan at and your modified AGI is: son pays all the taxes. Under the Federal Insur- • Less than $124,000 if married filing jointly compensation is separately compared to the ance Contributions Act (FICA), the employee threshold. Additional Medicare Tax applies to or qualifying widow(er); and the employer each pay half of the social se- • Less than $75,000 if single or head of Medicare wages, RRTA compensation, and curity and Medicare taxes. No earnings are self-employment income that are more than: household; or subject to both systems. • Less than $10,000 if married filing sepa- • $125,000 if married filing separately, rately. If you file a joint return and either you or your Table 1. Are Your Ministerial Earnings* Covered Under FICA or SECA? spouse wasn't covered by a retirement plan at Find the class to which you belong in the left column and read work, you may be able to take an IRA deduction across the table to find if you are covered under FICA or SECA. if your modified AGI is less than $206,000. 't rely on this table alone. Also read the discussion for the class Modified AGI limit for Roth IRA contribu- in the following pages. tions increased. For 2020, you may be able to contribute to your Roth IRA if your modified AGI Class Covered under FICA? Covered under SECA? is: • Less than $206,000 if married filing jointly NO. Your ministerial earnings YES, if you don't have an or qualifying widow(er); are exempt. approved exemption from • Less than $139,000 if single, head of the IRS. household, or married filing separately and you didn't live with your spouse at any time NO, if you have an during the year; or approved exemption. • Less than $10,000 if married filing sepa- rately and you lived with your spouse at Member of a religious NO. Your ministerial earnings YES, if you don't have an any time during the year. who hasn't taken a vow of are exempt. approved exemption from the IRS. Earned income credit (EIC). For 2020, the maximum amount of income you can earn and NO, if you have an still claim the EIC has increased. See Earned approved exemption. Income Credit, later. Member of a YES, if: NO. Your ministerial who has taken a vow of • Your order elected FICA earnings are exempt. poverty coverage for its Reminders members; or Form 1040-SR. Form 1040-SR, U.S. Tax Re- • You worked outside the turn for Seniors, was introduced for use begin- order and the work ning in tax year 2019. You can use this form for wasn't required by, or tax year 2020 if you are age 65 or older at the done on behalf of, the end of 2020. The form generally mirrors Form order. 1040. However, the Form 1040-SR has larger text and some helpful tips that older taxpayers NO, if neither of the above may find helpful. See the Instructions for Forms applies. 1040 and 1040-SR for more information. Christian Science practitioner NO. Your ministerial earnings YES, if you don't have an No miscellaneous itemized deductions al- or reader are exempt. approved exemption from lowed. You can no longer claim any miscella- the IRS. neous itemized deductions. Miscellaneous itemized deductions are those deductions that NO, if you have an would have been subject to the 2% of adjusted approved exemption. gross income limitation. See the Instructions for Schedule A (Form 1040) for more information Religious worker (church YES, if your employer didn't YES, if your employer on these changes. employee) elect to exclude you. elected to exclude you from Social security information. Social security FICA. beneficiaries may quickly and easily obtain vari- ous information from SSA's website with a my NO, if your employer elected NO, if you are covered Social Security account, including getting a re- to exclude you. under FICA. placement Form SSA-1099 or SSA-1042S. For Member of a recognized YES, if you are an employee YES, if you are more information, go to SSA.gov/myaccount. religious and don't have an approved self-employed and don't Photographs of missing children. The IRS is exemption from the IRS. have an approved a proud partner with the National Center for exemption from the IRS. Missing & Exploited Children® (NCMEC). Pho- tographs of missing children selected by the NO, if you have an approved NO, if you have an Center may appear in this publication on pages that would otherwise be blank. You can help exemption. approved exemption. bring these children home by looking at the photographs and calling 800-THE-LOST * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed (800-843-5678) if you recognize a child. later.

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• $250,000 if married filing jointly, or Help/ITA where you can find topics using the for information about getting these publications • $200,000 for any other filing status. search feature or by viewing the categories lis- and forms. There is no employer match for Additional Med- ted. icare Tax. For more information, see Form Getting tax forms, instructions, and pub- 8959, Additional Medicare Tax, and its separate lications. Visit IRS.gov/Forms to download Social Security instructions. current and prior-year forms, instructions, and Coverage This publication contains information for the publications. following classes of taxpayers. This section gives information about which sys- • Ministers. Ordering tax forms, instructions, and tem (SECA or FICA) is used to collect social se- • Members of a religious order. publications. Go to IRS.gov/OrderForms to curity and Medicare taxes from members of the • Christian Science practitioners and read- order current forms, instructions, and publica- clergy (ministers, members of a religious order, ers. tions; call 800-829-3676 to order prior-year and Christian Science practitioners and read- • Religious workers (church employees). forms and instructions. The IRS will process ers) and religious workers (church employees). • Members of a recognized religious sect. your order for forms and publications as soon as possible. Do not resubmit requests you’ve Note. Unless otherwise noted, in this publi- already sent to us. You can get forms and publi- Coverage of Members of the cation references to members of the clergy in- cations faster online. Clergy clude ministers, members of a religious order (but not members of a recognized religious Useful Items The services you perform in the exercise of sect), and Christian Science practitioners and You may want to see: readers. your ministry, of the duties required by your reli- This publication covers the following topics gious order, or of your profession as a Christian Publication about the collection of social security and Medi- Science practitioner or reader are covered by social security and Medicare under SECA. Your care taxes from members of the clergy, reli- 54 54 Tax Guide for U.S. Citizens and gious workers, and members of a recognized Resident Aliens Abroad earnings for these ministerial services (defined religious sect. later) are subject to self-employment (SE) tax

525 525 Taxable and Nontaxable Income • Which earnings are taxed under FICA and unless one of the following applies. You are a member of a religious order who which under SECA. See Table 1. 529 529 Miscellaneous Deductions • • How a member of the clergy can apply for has taken a vow of poverty. 535 535 Business Expenses an exemption from self-employment tax. • You ask the IRS for an exemption from SE tax for your services and the IRS approves • How a member of a recognized religious 590-A 590-A Contributions to Individual sect can apply for an exemption from both Retirement Arrangements (IRAs) your request. See Exemption From self-employment tax and FICA taxes. Self-Employment (SE) Tax, later. 590-B 590-B Distributions from Individual • You are subject only to the social security • How a member of the clergy or religious Retirement Arrangements (IRAs) worker figures net earnings from self-em- laws of a foreign country under the provi- sions of a social security agreement be- ployment. 596 596 Earned Income Credit (EIC) tween the and that country. This publication also covers certain income Form (and Instructions) For more information, see Bilateral Social tax rules of interest to ministers and members Security (Totalization) Agreements in Pub. of a religious order. SS-8 SS-8 Determination of Worker Status for 54. Purposes of Federal Employment In the back of Pub. 517 is a of work- Taxes and Income sheets that you can use to figure the Your earnings that aren't from ministerial

amount of your taxable ministerial in- SS-16 SS-16 Certificate of Election of Coverage services may be subject to social security tax come and allowable deductions. Under the Federal Insurance under FICA or SECA according to the rules that Contributions Act apply to taxpayers in general. See Ministerial Services, later.

Note. In this publication, the term “church” Schedule C (Form 1040) Schedule C (Form 1040) Profit or Loss is generally used in its generic sense and not in From Business (Sole Proprietorship) reference to any particular . Ministers Schedule SE (Form 1040) Schedule SE (Form 1040) Self-Employment Tax Comments and suggestions. We welcome If you are a minister of a church, your earnings for the services you perform in your capacity as your comments about this publication and sug- 1040-ES 1040-ES Estimated Tax for Individuals gestions for future editions. a minister are subject to SE tax, even if you per- 1040-X 1040-X Amended U.S. Individual Income form these services as an employee of that You can send us comments through church. However, you can request that the IRS IRS.gov/FormComments. Or, you can write to: grant you an exemption, as discussed under 4029 4029 Application for Exemption From Exemption From Self-Employment (SE) Tax, Internal Social Security and Medicare Taxes later. For the specific services covered, see Tax Forms and Publications and Waiver of Benefits Ministerial Services, later. 1111 Constitution Ave. NW, IR-6526 4361 4361 Application for Exemption From Washington, DC 20224 Self-Employment Tax for Use by Ministers defined. Ministers are individuals Ministers, Members of Religious who are duly ordained, commissioned, or li- Although we can’t respond individually to Orders and Christian Science censed by a religious body constituting a each comment received, we do appreciate your Practitioners church or church denomination. Ministers have feedback and will consider your comments and the authority to conduct religious , per- 8274 8274 Certification by Churches and suggestions as we revise our tax forms, instruc- Qualified Church-Controlled form sacerdotal functions, and administer ordi- tions, and publications. Do not send tax ques- Organizations Electing Exemption nances or according to the prescri- tions, tax returns, or payments to the above ad- From Employer Social Security and bed tenets and practices of that church or dress. Medicare Taxes denomination. Getting answers to your tax questions. If a church or denomination ordains some 8959 8959 Additional Medicare Tax If you have a tax question not answered by this ministers and licenses or commissions others, publication or the How To Get Tax Help section 8962 8962 Premium (PTC) anyone licensed or commissioned must be able at the end of this publication, go to the IRS In- to perform substantially all the religious func- teractive Tax Assistant page at IRS.gov/ Ordering publications and forms. See How tions of an ordained minister to be treated as a To Get Tax Help, at the end of this publication, minister for social security purposes.

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Employment status for other tax purposes. period of up to 20 calendar quarters before the Election by Church To Exclude Its Even though all of your income from performing quarter in which it files the certificate. If the elec- Employees From FICA Coverage ministerial services is subject to self-employ- tion is made, the order or subdivision pays both ment tax for social security tax purposes, you the employer's and employee's share of the tax. Churches and qualified church-controlled or- may be an employee for income tax or retire- You don't pay any of the FICA tax. ganizations (church organizations) that are op- ment plan purposes in performing those same posed for religious reasons to the payment of services. For income tax or retirement plan pur- Services performed outside the order. social security and Medicare taxes may elect to Even if you are a member of a religious order poses, your income earned as an employee will exclude their employees from FICA coverage. If who has taken a vow of poverty and the order be considered wages. your employer makes this election, it doesn't requires you to turn over amounts you earn, pay the employer's portion of the FICA taxes or Common-law employee. Under com- your earnings are subject to federal income tax withhold from your pay your portion of the FICA mon-law rules, you are considered either an and either SE tax or FICA tax (including estima- taxes. Instead, your wages are subject to SECA employee or a self-employed person. Gener- ted tax payments and/or withholding) if you: and you must pay SE tax on your wages if they ally, you are an employee if you perform serv- Are self-employed or an employee of an • exceed $108.28 during the tax year. However, ices for someone who has the legal right to con- organization outside your religious com- you can request an exemption from SE tax if trol both what you do and how you do it, even if munity; and you are a member of a recognized religious you have considerable discretion and freedom Perform work not required by, or done on • sect, as discussed below. of action. For more information about the com- behalf of, the order. mon-law rules, see Pub. 15-A, Employer's Sup- In these cases, your income from self-em- Churches and church organizations make plemental Tax Guide. ployment or as an employee of that outside or- this election by filing two copies of Form 8274. If a congregation employs you and pays you ganization is taxable to you directly. You may, For more information about making this elec- a salary, you are generally a common-law em- however, be able to take a charitable deduction tion, see Form 8274. ployee and income from the exercise of your for the amount you turn over to the order. See ministry is wages for income tax purposes. Pub. 526, Charitable Contributions. However, amounts received directly from mem- Election by Certain Church Employees Who Are Opposed to bers of the congregation, such as fees for per- Rulings. Organizations and individuals may re- forming , , or other personal quest rulings from the IRS on whether they are Social Security and Medicare services, aren't wages; such amounts are religious orders, or members of a religious or- You may be able to choose to be exempt from self-employment income for both income tax der, respectively, for FICA tax, SE tax, and fed- social security and Medicare taxes, including purposes and social security tax purposes. eral income tax withholding purposes. To re- the SE tax, if you are a member of a recognized quest a ruling, follow the procedures in religious sect or division and work for a church Example. A church hires and pays you a Revenue Procedure 2021-1. To find the reve- (or church-controlled nonprofit division) that salary to perform ministerial services subject to nue procedure, go to IRS.gov and type “Reve- doesn't pay the employer's part of the social se- its control. Under the common-law rules, you nue Procedure 2021-1” in the search box. are an employee of the church while performing curity tax on wages. This exemption doesn't ap- those services. ply to your service, if any, as a minister of a Christian Science Practitioners church or as a member of a religious order. Form SS-8. If you aren't certain whether and Readers you are an employee or a self-employed per- Make this choice by filing Form 4029. See son, you can get a determination from the IRS Generally, your earnings from services you per- Requesting Exemption—Form 4029, later, un- by filing Form SS-8. form in your profession as a Christian Science der Members of Recognized Religious . practitioner or reader are subject to SE tax. Members of Religious Orders However, you can request an exemption as dis- cussed under Exemption From Self-Employ- U.S. Citizens and Resident If you are a member of a religious order who ment (SE) Tax, later. and Nonresident Aliens hasn't taken a vow of poverty, your earnings for ministerial services you perform as a member of Practitioners. Christian Science practitioners To be covered under the SE tax provisions the order are subject to SE tax. See Ministerial are members in standing of the Mother (SECA), individuals must generally be citizens Services, later. However, you can request that Church, The First Church of Christ, Scientist, in or resident aliens of the United States. Nonresi- the IRS grant you an exemption as discussed Boston, Massachusetts, who practice healing dent aliens aren't covered under SECA unless a under Exemption From Self-Employment (SE) according to the teachings of Christian Science. social security agreement in effect between the Tax, later. State law specifically exempts Christian Sci- United States and the foreign country deter- ence practitioners from licensing requirements. mines that they are covered under the U.S. so- Vow of poverty. If you are a member of a reli- Some Christian Science practitioners are cial security system. gious order and have taken a vow of poverty, also Christian Science teachers or lecturers. In- you are already exempt from paying SE tax on come from teaching or lecturing is considered To determine your status, see Pub. your earnings for ministerial services you per- the same as income from their work as practi- 519, U.S. Tax Guide for Aliens. form as an agent of your church or its agencies. tioners. You don't need to request a separate exemp- Residents of , the U.S. Virgin Is- tion. For income tax purposes, the earnings are Readers. For tax purposes, Christian Science lands, Guam, the Commonwealth of the tax free to you. Your earnings are considered readers are considered the same as ordained, (CNMI), and the income of the religious order. commissioned, or licensed ministers. American . If you are a resident of one of these U.S. but not a U.S. citizen, Services covered under FICA at the for SE tax purposes you are treated the same election of the order. However, even if you Coverage of Religious as a citizen or resident alien of the United have taken a vow of poverty, the services you Workers (Church States. For information on figuring the tax, see perform for your church or its agencies may be Employees) Self-Employment Tax: Figuring Net Earnings, covered under social security. Your services later. are covered if your order, or an autonomous If you are a religious worker (a church em- subdivision of the order, elects social security ployee) and aren't in one of the classes already coverage for its current and future vow-of-pov- discussed, your wages are generally subject to Ministerial Services erty members. social security and Medicare tax under FICA, The order or subdivision elects coverage by not SECA. Some exceptions are discussed Ministerial services, in general, are the services filing Form SS-16. The election may cover cer- next. you perform in the exercise of your ministry, in tain vow-of-poverty members for a retroactive the exercise of your duties as required by your

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religious order, or in the exercise of your profes- Table 2. The Self-Employment Application and sion as a Christian Science practitioner or Approval Process reader. Income you receive for performing min- isterial services is subject to SE tax unless you Who Can Apply have an exemption, as explained later. Even if you have an exemption, only the income you re- Members of the Clergy Members of Recognized ceive for performing ministerial services is ex- Religious Sects empt. The exemption doesn't apply to any other income. How File Form 4361 File Form 4029 When File by the due date (including File anytime The following discussions provide more de- extensions) of your income tax tailed information on ministerial services of min- isters, members of a religious order, and Chris- return for the second tax year in tian Science practitioners and readers. which you had at least $400 of net earnings from self-employment, any Ministers of which came from ministerial services Most services you perform as a minister, , Approval If approved, you will receive an If approved, you will receive an , etc., are ministerial services. These serv- approved copy of Form 4361 approved copy of Form 4029 ices include: • Performing sacerdotal functions; Effective For all tax years after 1967 in which For all tax years beginning with the • Conducting religious worship; and Date you have at least $400 of net first year you meet the eligibility • Controlling, conducting, and maintaining earnings from self-employment, any requirements, discussed later religious organizations (including the reli- of which came from ministerial gious boards, , and other integral services agencies of such organizations) that are under the authority of a religious body that • Services you perform in a govern- and employer. In this case, your earnings from is a church or denomination. ment-owned and operated hospital. the services are taxed under the rules that ap- (These services are considered performed ply to employees in general, not under the rules You are considered to control, conduct, and by a government employee, not by a minis- for services performed as an agent of the order. maintain a religious organization if you direct, ter as part of the ministry.) However, serv- This result is true even if you have taken a vow manage, or promote the organization's activi- ices that you perform at a church-related of poverty. ties. hospital or and institution, or A religious organization is under the author- a private nonprofit hospital, are considered Example. Pat and Chris Green are ity of a religious body that is a church or de- to be part of the ministry and are consid- members of a religious order and have taken nomination if it’s organized for and dedicated to ered ministerial services. vows of poverty. They renounce all claims to carrying out the principles of a according to their earnings. The earnings belong to the or- the requirements governing the creation of insti- Books or articles. Writing religious books or der. tutions of the faith. articles is considered to be in the exercise of Pat is a licensed attorney. The superiors of your ministry and is considered a ministerial the order instructed her to get a job with a law Services for nonreligious organizations. service. firm. Pat joined a law firm as an employee and, Your services for a nonreligious organization This rule also applies to members of reli- as she requested, the firm made the salary pay- are ministerial services if the services are as- gious orders and to Christian Science practi- ments directly to the order. signed or designated by your church. Assigned tioners and readers. Chris is a secretary. The superiors of the or- or designated services qualify even if they don't der instructed him to accept a job with the busi- involve performing sacerdotal functions or con- Members of ness office of the church that supervises the or- ducting religious worship. der. Chris took the job and gave all his earnings If your services aren't assigned or designa- Religious Orders to the order. ted by your church, they are ministerial services Pat's services aren't duties required by the only if they involve performing sacerdotal func- Services you perform as a member of a reli- order. Her earnings are subject to social secur- tions or conducting religious worship. gious order in the exercise of duties required by ity and Medicare tax under FICA and to federal the order are ministerial services. The services income tax. Services that aren't part of your ministry. are considered ministerial because you perform Chris' services are duties required by the or- Income from services you perform as an em- them as an agent of the order. der. He is acting as an agent of the order and not as an employee of a third party. He doesn't ployee that aren't ministerial services is subject For example, if the order directs you to per- include the earnings in gross income, and they to social security and Medicare tax withholding form services for another agency of the super- aren't subject to income tax withholding or to under FICA (not SECA) under the rules that ap- vising church or an associated institution, you social security and Medicare tax under FICA or ply to employees in general. The following are considered to perform the services as an SECA. aren't ministerial services. agent of the order. • Services you perform for nonreligious or- ganizations other than the services stated However, if the order directs you to work Christian Science above. outside the order, this employment won't be • Services you perform as a duly ordained, considered a required by the order unless: Practitioners and Readers commissioned, or licensed minister of a Your services are the kind that are ordina- • Services you perform as a Christian Science church as an employee of the United rily performed by members of the order; practitioner or reader in the exercise of your States, the District of Columbia, a foreign and profession are ministerial services. Amounts government, or any of their political subdi- Your services are part of the duties that • you receive for performing these services are visions. These services aren't ministerial must be exercised for, or on behalf of, the generally subject to SE tax. You may request an services even if you are performing sacer- religious order as its agent. exemption from SE tax, discussed next, which dotal functions or conducting religious wor- applies only to those services. ship. (For example, if you perform services Effect of employee status. Ordinarily, if your as a in the Armed Forces of the services aren't considered directed or required United States, those services aren't minis- of you by the order, you and the outside party terial services.) for whom you work are considered employee

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• You establish that the organization is a self-employment earnings from the store. In church or a or association of 2020, he had net self-employment earnings of Exemption From churches. $1,500 as a minister and $10,000 net self-em- Self-Employment • You didn't make an election discussed ear- ployment earnings from the store. lier under Who can't be exempt. Rev. Moss had net earnings from self-em- (SE) Tax • You sign and return the statement the IRS ployment in 2018 and 2020 that were $400 or mails to you to certify that you are request- more each year, and part of the self-employ- You can request an exemption from SE tax if ing an exemption based on the grounds lis- ment earnings in each of those years was for you are a member of the clergy (minister, mem- ted on the statement. his services as a minister. Thus, he must file his ber of a religious order, or Christian Science application for exemption by the due date, in- practitioner or reader) or a member of a recog- Requesting Exemption—Form cluding extensions, for his 2020 income tax re- nized religious sect. 4361 turn. However, if Rev. Moss doesn't receive IRS approval for an exemption by April 15, 2021, his Generally, members of religious orders SE tax for 2020 is due by that date. TIP who have taken a vow of poverty are To request exemption from SE tax, file Form already exempt from paying SE tax, as 4361 in triplicate (original and two copies) with the IRS. Death of individual. The right to file an appli- discussed earlier under Members of Religious cation for exemption ends with an individual's Orders under Social Security Coverage. They The IRS will return to you a copy of the death. A surviving spouse, executor, or admin- don't have to request the exemption. Form 4361 that you filed indicating istrator can't file an exemption application for a RECORDS whether it has approved your exemp- deceased clergy member. Who can't be exempt. You can't be exempt tion. If it’s approved, keep the approved copy of from SE tax if you made one of the following Form 4361 in your permanent records. Effective date of exemption. An approved elections to be covered under social security. exemption is effective for all tax years after These elections are irrevocable. When to file. File Form 4361 by the date your 1967 in which you have $400 or more of net • You elected to be covered under social se- income tax return is due, including extensions, earnings from self-employment and any part of curity by filing Form 2031, Revocation of for the second tax year in which both of the fol- those earnings is for services as a member of Exemption From Self-Employment Tax for lowing are true. the clergy. Once the exemption is approved, it Use by Ministers, Members of Religious is irrevocable. Orders, and Christian Science Practition- 1. You have net earnings from self-employ- ers, for your 1986, 1987, 2000, or 2001 tax ment of at least $400. Example. Rev. Trudy Austin, ordained in year. 2. Any part of those net earnings was from 2017, had $400 or more in net self-employment • You elected before 1968 to be covered un- ministerial services you performed as a: earnings, in both 2017 and 2020, part of which der social security for your ministerial serv- was from her services as a minister. She files ices. a. Minister, an application for exemption on February 19, b. Member of a religious order, or 2021. If an exemption is granted, it is effective Requesting exemption. Table 2 briefly sum- for 2017 and the following years. marizes the procedure for requesting exemp- c. Christian Science practitioner or tion from the SE tax. More detailed explana- reader. Refunds of SE tax. If, after receiving an ap- proved Form 4361, you find that you overpaid tions follow. The 2 years don't have to be consecutive tax SE tax, you can file a claim for refund on Form years. If you are a minister, member of a reli- 1040-X. Generally, for a refund, you must file ! gious order, or Christian Science prac- The approval process can take some Form 1040-X within 3 years from the date you CAUTION titioner, an approved exemption only time, so you should file Form 4361 as filed the return or within 2 years from the date applies to earnings you receive for ministerial soon as possible. you paid the tax, whichever is later. A return you services, discussed earlier. It doesn't apply to filed, or tax you paid, before the due date is any other self-employment income. considered to have been filed or paid on the Example 1. Rev. Lawrence Jaeger, a cler- due date. gyman ordained in 2020, has net self-employ- ment earnings as a minister of $450 in 2020 If you file a claim after the 3-year period but Members of the Clergy and $500 in 2021. He must file his application within 2 years from the time you paid the tax, for exemption by the due date, including exten- the credit or refund won't be more than the tax sions, for his 2021 income tax return. However, you paid within the 2 years immediately before To claim the exemption from SE tax, you must if Rev. Jaeger doesn't receive IRS approval for you file the claim. meet all of the following conditions. an exemption by April 15, 2022, his SE tax for • You file Form 4361, described below under 2021 is due by that date. Requesting Exemption—Form 4361. Members of Recognized You are conscientiously opposed to public Religious Sects • Example 2. Rev. Louise Wolfe has only insurance because of your individual reli- $300 in net self-employment earnings as a min- gious considerations (not because of your If you are a member of a recognized religious ister in 2020, but earned more than $400 in general ), or you are opposed sect, or a division of a recognized religious sect, 2019 and expects to earn more than $400 in because of the principles of your religious you can apply for an exemption from payment 2021. She must file her application for exemp- denomination. of social security and Medicare taxes on both tion by the due date, including extensions, for You file for other than economic reasons. your self-employment income and the wages • her 2021 income tax return. However, if she You inform the ordaining, commissioning, you earn from an employer who also has an ex- • doesn't receive IRS approval for an exemption or licensing body of your church or order emption. by April 15, 2022, her SE tax for 2021 is due by that you are opposed to public insurance if that date. you are a minister or a member of a reli- Exception. If you received social security ben- efits or payments, or anyone else received gious order (other than a vow-of-poverty Example 3. In 2018, Rev. David Moss was these benefits or payments based on your wa- member). This requirement doesn't apply ordained a minister and had $700 in net ges or self-employment income, you can't ap- to Christian Science practitioners or read- self-employment earnings as a minister. In ply. However, if you pay your benefits back, you ers. 2019, he received $1,000 as a minister, but his may be considered for exemption. Contact your • You establish that the organization that or- related expenses were over $1,000. Therefore, local Social Security Administration office to dained, commissioned, or licensed you, or he had no net self-employment earnings as a find out the amount you must pay back. your religious order, is a tax-exempt reli- minister in 2019. Also in 2019, he opened a gious organization. bookstore and had $8,000 in net

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Eligibility requirements. To claim this ex- the IRS approves your exemption in 2020, your the first calendar quarter after the quarter in emption from SE tax, all of the following require- exemption is effective for tax year 2018 and all which you file Form 4029. The exemption will ments must be met. later years.) end on the last day of the calendar quarter be- fore the quarter in which the employer, em- 1. You must file Form 4029, discussed later The exemption will end if you fail to meet the ployee, sect, or division fails to meet the re- under Requesting Exemption—Form eligibility requirements or if the Commissioner quirements. 4029. of Social Security determines that the sect or di- vision fails to meet them. You must notify the 2. As a follower of the established teachings IRS within 60 days if you are no longer a mem- of the sect or division, you must be consci- ber of the religious group, or if you no longer fol- Self-Employment Tax: entiously opposed to accepting benefits of low the established teachings of this group. The any private or public insurance that makes exemption will end for the tax year in which you Figuring Net Earnings payments for death, , old age, re- or your sect/division first fails to meet the eligi- tirement, or medical care, or provides bility requirements. There are two methods for figuring your net services for medical care. earnings from self-employment as a member of Refunds of SE tax paid. To get a refund of the clergy or a religious worker. 3. You must waive all rights to receive any any SE tax you paid while the exemption was in • Regular method. social security payment or benefit and effect, file Form 1040-X. For information on fil- • Nonfarm optional method. agree that no benefits or payments will be ing this form, see Refunds of SE tax under Re- made to anyone else based on your wa- You may find Worksheets 1 through 3 questing Exemption—Form 4361, earlier. ges and self-employment income. helpful in figuring your net earnings from self-employment. Blank work- 4. The Commissioner of Social Security must Exemption From FICA Taxes sheets are in the back of this publication. determine that: a. Your sect or division has the estab- Generally, under FICA, the employer and the lished teachings as described in (2) employee each pay half of the social security Regular Method above; and Medicare tax. Both the employee and the employer, if they meet the eligibility require- Most people use the regular method. Under this b. It is the practice, and has been for a ments, discussed earlier, can apply to be ex- substantial period of time, for mem- method, figure your net earnings from self-em- empt from their share of FICA taxes on wages ployment by totaling your gross income for bers of the sect or division to provide paid by the employer to the employee. for their dependent members in a services you performed as a minister, a mem- manner that is reasonable in view of ber of a religious order who hasn't taken a vow A partnership in which each partner holds a the members' general level of living; of poverty, or a Christian Science practitioner or religious exemption from social security and and reader. Then, subtract your allowable business Medicare tax is an employer for this purpose. deductions and multiply the difference by c. The sect or division has existed at all If the employer's application is ap- 92.35% (0.9235). Use Schedule SE (Form times since December 31, 1950. TIP proved, the exemption will apply only to 1040) to figure your net earnings and SE tax. FICA taxes on wages paid to employ- Requesting Exemption—Form ees who also received an approval of identical If you are an employee of a church that elec- 4029 applications. ted to exclude you from FICA coverage, figure net earnings by multiplying your church wages To request the exemption, file Form 4029 in shown on Form W-2 by 92.35% (0.9235). Don't Information for employers. If you have an triplicate (original and two copies) with the So- reduce your wages by any business deductions approved Form 4029 and you have an em- cial Security Administration at the address when making this computation. Use Sched- ployee who has an approved Form 4029, don't shown on the form. The sect or division must ule SE (Form 1040), to figure your net earnings report wages you paid to the employee as so- complete part of the form. and SE tax. cial security and Medicare wages. The IRS will return to you a copy of the If you have an employee who doesn't have If you have an approved exemption, or Form 4029 that you filed indicating an approved Form 4029, you must withhold the ! you are automatically exempt, don't in- RECORDS whether it has approved your exemp- employee's share of social security and Medi- CAUTION clude the income or deductions from tion. If it is approved, keep the approved copy care taxes and pay the employer's share. ministerial services in figuring your net earnings of Form 4029 in your permanent records. from self-employment. Form W-2. When preparing a Form W-2 for an employee with an approved Form 4029, en- When to file. You can file Form 4029 at any Amounts included in gross income. To fig- ter “Form 4029” in box 14, “Other.” Don't make ure your net earnings from self-employment (on time. any entries in box 3, 4, 5, or 6. If you have an approved exemption from SE Schedule SE (Form 1040)), include in gross in- tax and for some reason that approved exemp- Forms 941, 943, and 944. If both you and come: tion ended, you must file a new Form 4029 if your employee have received approved Forms 1. Salaries and fees for your ministerial serv- you subsequently meet the eligibility require- 4029, don't include these exempt wages on the ices (discussed earlier); ments, discussed earlier. See Effective date of following forms. Instead, follow the instructions exemption next for information on when the given below. 2. Offerings you receive for marriages, bap- newly approved exemption would become ef- • Form 941, Employer's QUARTERLY Fed- tisms, , masses, etc.; fective. eral Tax Return: check the box on line 4 3. The of meals and lodging provided If you have a previously approved exemp- and enter “Form 4029” in the empty space to you, your spouse, and your dependents tion from SE tax, you are considered to have below the checkbox. for your employer's convenience; met the requirements for exemption from social • Form 943, Employer's Annual Federal Tax security and Medicare taxes on wages and Return for Agricultural Employees: enter 4. The fair rental value of a parsonage provi- don't need to file a new Form 4029. “Form 4029” on the dotted line next to the ded to you (including the cost of utilities lines 2 and 4 entry spaces. that are furnished) and the rental allow- Effective date of exemption. An approved • Form 944, Employer's ANNUAL Federal ance (including an amount for payment of exemption from SE tax is generally effective for Tax Return: check the box on line 3 and utilities) paid to you; and all tax years beginning with the first year you enter “Form 4029” in the empty space be- 5. Any amount a church pays toward your in- meet the eligibility requirements discussed ear- low the checkbox. come tax or SE tax, other than withholding lier. (For example, if you meet the eligibility re- Effective date. An approved exemption the amount from your salary. This amount quirements in 2018, file Form 4029 in 2019, and from FICA becomes effective on the first day of is also subject to income tax.

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For the income tax treatment of items (2) curred in performing marriages and baptisms, Married Couple and (4), see Income Tax: Income and Expen- and in delivering speeches. Deduct these ex- Missionary Team ses, later. penses on Schedule C (Form 1040), and carry the net amount to line 2 of Schedule SE (Form If both spouses are duly ordained, commis- Example. Roger Adams receives an 1040). sioned, or licensed ministers of a church and annual salary of $39,000 as a full-time minister. Wages earned as a common-law employee have an agreement that each will perform spe- The $39,000 includes $5,000 that is designated (explained earlier) of a church are generally cific services for which they are paid jointly or as a rental allowance to pay utilities. His church subject to self-employment tax unless an ex- separately, they must divide the self-employ- owns a parsonage that has a fair rental value of emption is requested, as discussed earlier un- ment income according to the agreement. $12,000 per year. The church gives Pastor der Exemption From Self-Employment (SE) Adams the use of the parsonage. He isn't ex- Tax. Subtract any allowable expenses from If the agreement is with one spouse only empt from SE tax. He must include $51,000 those wages, include the net amount on line 2 and the other spouse isn't paid for any specific ($39,000 plus $12,000) when figuring his net of Schedule SE (Form 1040), and attach an ex- duties, amounts received for their services are earnings for SE tax purposes. planation. Don't complete Schedule C (Form included only in the self-employment income of The results would be the same if, instead of 1040). the spouse having the agreement. the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had Employee reimbursement arrangements. If received an annual salary of $51,000 of which you received an advance, allowance, or reim- Earnings Subject $17,000 ($5,000 plus $12,000) per year was bursement for your employee expenses, how to SE Tax designated as a rental allowance. you report this amount and your employee ex- penses depends on whether your employer re- For 2020, the maximum net earnings from Overseas duty. Your net earnings from imbursed you under an accountable plan or a self-employment subject to social security (old self-employment are determined without any nonaccountable plan. Ask your employer if you age, survivors, and disability insurance) tax is foreign earned income exclusion or the foreign aren't sure if it reimburses you using an ac- $137,700 minus any wages and tips you earned housing exclusion or deduction if you are a U.S. countable or a nonaccountable plan. that were subject to social security tax. The tax citizen or resident alien serving abroad and liv- rate for the social security part is 12.4%. In ad- ing in a foreign country. Accountable plans. To be an accountable dition, all of your net earnings are subject to the For information on excluding foreign earned plan, your employer's reimbursement arrange- Medicare (hospital insurance) part of the SE income or the foreign housing amount, see Pub. ment must include all three of the following tax. This is 2.9%. The combined 54. rules. self-employment tax rate is 15.3%. • Your expenses must have a business con- Example. Diane Jones was the minister of nection—that is, you must have paid or in- Additional Medicare Tax. A 0.9% Additional a U.S. church in Mexico. She earned $35,000 in curred deductible expenses while perform- Medicare Tax applies to Medicare wages, that position and was able to exclude it all for in- ing services as an employee of your RRTA compensation, and self-employment in- come tax purposes under the foreign earned in- employer. come that are more than: come exclusion. The United States doesn't • You must adequately account to your em- • $125,000 if married filing separately, have a social security agreement with Mexico, ployer for these expenses within a reason- • $250,000 if married filing jointly, or so Mrs. Jones is subject to U.S. SE tax and able period of time. • $200,000 for any other filing status. must include $35,000 when figuring net earn- • You must return any excess reimburse- Medicare wages and self-employment income ings from self-employment. ment or allowance within a reasonable pe- are combined to determine if income exceeds riod of time. the threshold. A self-employment loss isn't con- Specified U.S. territories. The exclusion from sidered for purposes of this tax. RRTA compen- gross income for amounts derived from Ameri- The reimbursement isn't reported on your sation is separately compared to the threshold. can Samoa or Puerto Rico doesn't apply in fig- Form W-2. Generally, if your expenses equal For more information, see Form 8959, Addi- uring net earnings from self-employment. Also your reimbursement, you have no deduction. If tional Medicare Tax, and its separate instruc- see Residents of Puerto Rico, the U.S. Virgin Is- your expenses are more than your reimburse- tions. lands, Guam, the Commonwealth of the North- ment, you can deduct your excess expenses for ern Mariana Islands (CNMI), and American Sa- SE tax and income tax purposes. moa, earlier, under U.S. Citizens and Resident Nonaccountable plan. A nonaccountable Nonfarm Optional Method and Nonresident Aliens. plan is a reimbursement arrangement that doesn't meet one or more of the three rules lis- You may be able to use the nonfarm optional Amounts not included in gross income. ted under Accountable plans above. In addition, method for figuring your net earnings from Don't include the following amounts in gross in- even if your employer has an accountable plan, self-employment. In general, the nonfarm op- come when figuring your net earnings from the following payments will be treated as being tional method is intended to permit continued self-employment. paid under a nonaccountable plan. coverage for social security and Medicare pur- • Offerings that others made to the church. • Excess reimbursements you fail to return poses when your income for the tax year is low. • Contributions by your church to a tax-shel- to your employer. tered annuity plan set up for you, including • Reimbursement of nondeductible expen- You may use the nonfarm optional method if any salary reduction contributions (elective ses related to your employer's business. you meet all of the following tests. deferrals) that aren't included in your gross income. Your employer will combine any reimburse- 1. You are self-employed on a regular basis. • Pension payments or retirement allowan- ment paid to you under a nonaccountable plan You meet this test if your actual net earn- ces you receive for your past ministerial with your wages, salary, or other compensation ings from self-employment were $400 or services. and report the combined total in box 1 of your more in at least 2 of the 3 tax years before • The rental value of a parsonage or a par- Form W-2. Because reimbursements under a the one for which you use this method. sonage allowance provided to you after nonaccountable plan are included in your gross The net earnings can be from either you retire. income, you can deduct your related expenses or nonfarm earnings or both. (for SE tax and income tax purposes) regard- less of whether they are more than, less than, or 2. You have used this method less than 5 Allowable deductions. When figuring your prior years. (There is a 5-year lifetime net earnings from self-employment, deduct all equal to your reimbursement. For more information on accountable and limit.) The years don't have to be consecu- your expenses related to your ministerial serv- tive. ices performed as a self-employed person. nonaccountable plans, see Pub. 463, Travel, These are ministerial expenses you incurred Gift, and Car Expenses. 3. Your net nonfarm profits were: while working other than as a common-law em- a. Less than $6,107; and ployee of the church. They include expenses in-

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b. Less than 72.189% of your gross non- Exclusion of Rental Allowance and The amount you exclude can't be more than farm income. Fair Rental Value of a Parsonage the fair rental value of the home, including fur- nishings, plus the cost of utilities. If you meet all three tests, use Table 3 to fig- Ordained, commissioned, or licensed ministers ure your net earnings from self-employment un- of the may be able to exclude from in- Fair rental value of parsonage. You can ex- der the nonfarm optional method. come tax the rental allowance or fair rental clude from gross income the fair rental value of value of a parsonage that is provided to them as a house or parsonage, including utilities, fur- Table 3. Figuring Nonfarm Net pay for their services. Services include: nished to you as part of your earnings. How- Earnings • Ministerial services, discussed earlier; ever, the exclusion can't be more than the rea- • Administrative duties and teaching at theo- sonable pay for your services. If you pay for the IF your gross logical ; and utilities, you can exclude any allowance desig- nonfarm THEN your net earnings • The ordinary duties of a minister performed nated for utility costs, up to your actual cost. income is ... are equal to ... as an employee of the United States (other Example. Rev. Joanna Baker is a full-time $8,460 or less Two-thirds of your gross than as a chaplain in the Armed Forces), a minister. The church allows her to use a par- nonfarm income. state, , political subdivision, or the District of Columbia. sonage that has an annual fair rental value of More than $5,640 $24,000. The church pays her an annual salary $8,460 This exclusion applies only for income tax of $67,000, of which $7,500 is designated for purposes. It doesn't apply for SE tax purposes, utility costs. Her actual utility costs during the as discussed earlier under Amounts included in year were $7,000. Actual net earnings. Multiply your total earn- gross income under Self-Employment Tax: Fig- For income tax purposes, Rev. Baker ex- ings subject to SE tax by 92.35% (0.9235) to uring Net Earnings. cludes $31,000 from gross income ($24,000 fair get actual net earnings. Actual net earnings are rental value of the parsonage plus $7,000 from equivalent to net earnings under the “Regular Designation requirement. The church or or- the allowance for utility costs). She will report Method.” ganization that employs you must officially des- $60,000 ($59,500 salary plus $500 of unused ignate the payment as a housing allowance be- utility allowance). Her income for SE tax purpo- More information. For more information on fore it makes the payment. It must designate a ses, however, is $91,000 ($67,000 salary + the nonfarm optional method, see Pub. 334, definite amount. It can't determine the amount $24,000 fair rental value of the parsonage). Tax Guide for Small Business, and the Instruc- of the housing allowance at a later date. If the tions for Schedule SE (Form 1040). church or organization doesn't officially desig- Home ownership. If you own your home and nate a definite amount as a housing allowance, you receive as part of your salary a housing or you must include your total salary in your in- rental allowance, you may exclude from gross Income Tax: come. income the smallest of: • The amount actually used to provide a If you are employed and paid by a local con- Income and Expenses home; gregation, a resolution by a • The amount officially designated as a agency of your denomination doesn't effectively Some income and expense items are treated rental allowance; or designate a housing allowance for you. The lo- the same for both income tax and SE tax purpo- • The fair rental value of the home, including cal congregation must officially designate the ses and some are treated differently. furnishings, utilities, garage, etc. part of your salary that is a housing allowance. However, a resolution of a national church Note. For purposes of this section, referen- Excess rental allowance. You must in- agency can designate your housing allowance if ces to members of the clergy are only to minis- clude in gross income the amount of any rental you are directly employed by the national ters or members of a religious order. allowance that is more than the smallest of: agency. • Your reasonable salary, An official designation of an amount as a • The fair rental value of the home plus utilit- Income Items housing or rental allowance may be shown in ies, or an employment contract, in the minutes of a • The amount actually used to provide a The tax treatment of offerings and fees, outside church or qualified organization, in a budget, or home. earnings, rental allowances, rental value of a in any official action taken in advance of pay- Include this amount in the total on Form parsonage, earnings of members of religious ment of the allowance. A designation is suffi- 1040 or 1040-SR, line 1. On the dotted line next orders, and foreign earned income is discussed cient if it permits a payment to be identified as a to line 1, enter “Excess allowance” and the here. payment of a rental or housing allowance as amount. distinguished from salary or other remuneration. Offerings and Fees Informal discussions don't amount to an offi- You may deduct the home mortgage cial designation. However, the facts and cir- interest and taxes paid on If you are a member of the clergy, you must in- cumstances of a designation may demonstrate your home even though you pay all or clude in your income offerings and fees you re- that the designation was official. part of those expenses with funds you get ceive for marriages, baptisms, funerals, through a tax-free rental or parsonage allow- A church or employing organization masses, etc., in addition to your salary. If the of- ance. However, you can only deduct these ex- may report the rental allowance or fair fering is made to the religious institution, it isn't TIP penses as itemized deductions on Schedule A rental value of the parsonage (and util- taxable to you. (Form 1040). ities) in box 14 of Form W-2. Outside Earnings Retired ministers. If you are a retired minister, Rental allowances. If you receive in your sal- you can exclude from your gross income the If you are a member of a religious organization ary an amount officially designated as a rental rental value of a home (plus utilities) furnished and you give your outside earnings to the or- allowance (including an amount to pay utility to you by your church as a part of your pay for ganization, you still must include the earnings in costs), you can exclude the allowance from past services, or the part of your pension that your income. However, you may be entitled to a your gross income if: was designated as a rental allowance. How- charitable contribution deduction for the amount • You use the amount to provide or rent a ever, a minister's surviving spouse can't ex- paid to the organization. For more information, home, and clude the rental value unless the rental value is see Pub. 526. • The amount isn't more than reasonable for ministerial services he or she performs or pay for your services. performed.

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Teachers or administrators. If you are a min- for Individuals With Income From U.S. Posses- return. The statement must contain all of the fol- ister employed as a teacher or administrator by sions, covers the rules for taxpayers with in- lowing information. a church , college, or , you are come from U.S. territories. You can get these • A list of each item of taxable ministerial in- performing ministerial services for purposes of free publications from the IRS at IRS.gov/Forms come by source (such as wages, salary, the housing exclusion. However, if you perform or from most U.S. embassies or consulates. , baptisms, etc.) plus the amount. services as a teacher or administrator on the • A list of each item of tax-free ministerial in- faculty of a nonchurch college, you can't ex- come by source (parsonage allowance) clude from your income a housing allowance or Expense Items plus the amount. the value of a home that the college provides to • A list of each item of otherwise deductible you. The tax treatment of expenses allocable to ministerial expenses plus the amount. tax-free income and health insurance costs is • How you figured the nondeductible part of If you live in faculty lodging as an em- discussed here. your otherwise deductible expenses. TIP ployee of an educational institution or • A statement that the other deductions academic health center, all or part of claimed on your tax return aren't allocable the value of that lodging may be nontaxable un- Expenses Allocable to Tax-Free to your tax-free income. der a different rule. In Pub. 525, see Faculty Income lodging in the discussion on meals and lodging At the end of this publication, you will find under Fringe Benefits. If you receive a rental or parsonage allowance blank worksheets for your own use. that is exempt from income tax (tax free), you If you serve as a minister of music or minis- must allocate a portion of the expenses of oper- ter of , or serve in an administrative or ating your ministry to that tax-free income. You Health Insurance Costs of other function of your religious organization, but can't deduct the portion of your expenses that Self-Employed Ministers aren't authorized to perform substantially all of you allocate to your tax-free rental or parsonage the religious duties of an ordained minister in allowance. If you are self-employed, you may be able to your church (even if you are commissioned as a deduct the amount you paid in 2020 for medical minister of ), the housing exclusion Exception. This rule doesn't apply to your de- and dental insurance and qualified long-term doesn't apply to you. ductions for home mortgage interest or real es- care insurance for you, your spouse, your de- tate taxes on your home. pendents, and any child you may have who, as Theological students. If you are a theological of the end of the tax year, had not attained age student serving a required internship as a Figuring the allocation. Figure the portion of 27. part-time or assistant pastor, you can't exclude your otherwise deductible expenses that you a parsonage or rental allowance from your in- can't deduct (because you must allocate that For purposes of this deduction, your child come unless you are ordained, commissioned, portion to tax-free income) by multiplying the must be an individual who is your son, daugh- or licensed as a minister. expenses by the following fraction: ter, stepson, stepdaughter, or eligible foster child. An individual who has been legally adop- Traveling evangelists. You can exclude a Tax-free rental or ted by you (or placed with you for ) will designated rental allowance from out-of-town parsonage allowance be treated as your child. churches if you meet all of the following require- All income (taxable ments. and tax free) earned If you qualify, you can take this deduction as • You are an ordained minister. from your ministry an adjustment to income on Schedule 1 (Form • You perform ministerial services at 1040), line 16. See the Instructions for Forms churches located away from your com- 1040 and 1040-SR to figure your deduction. munity. When figuring the allocation, include the in- • You actually use the rental allowance to come and expenses related to the ministerial The following special rules apply to the maintain your permanent home. duties you perform both as an employee and as a self-employed person. self-employed health insurance deduction. • You can't take a medical expense deduc- Cantors. If you have a bona fide commission Reduce your otherwise deductible ex- tion on Schedule A (Form 1040) for any ex- and your congregation employs you on a penses only in figuring your income penses you claim for purposes of the full-time basis to perform substantially all the re- tax, not your SE tax. ligious functions of the Jewish faith, you can ex- self-employed health insurance deduction. clude a rental allowance from your gross in- • You can't take the deduction for any month Example. Rev. Charles Ashford received come. you are eligible to participate in a subsi- $40,000 in earnings for ministerial services con- dized plan of your (or your spouse's) em- sisting of a $28,000 salary for ministerial serv- ployer. Earnings—Members of Religious ices performed as an employee, $2,000 for • The deduction can't exceed your net earn- Orders weddings and baptisms performed as a ings from the business under which the in- self-employed person, and a $10,000 tax-free surance plan is established. Your net earn- Your earnings may be exempt from both in- parsonage allowance. He incurred $4,000 of ings under this rule don't include the come tax and SE tax if you are a member of a unreimbursed expenses connected with his income you earned as a common-law em- religious order who: earnings for ministerial services. $3,500 of the ployee (discussed earlier) of a church. • Has taken a vow of poverty, $4,000 is for employee expenses related to his • Receives earnings for services performed ministerial salary. He is no longer able to deduct More information. For more information about as an agent of the order and in the exer- the $3,500 incurred for employee expenses re- the self-employed health insurance deduction, cise of duties required by the order, and lated to his ministerial salary. Since the $500 is see 6 in Pub. 535. • Renounces the earnings and gives them to related to the weddings and baptisms he per- the order. formed as a self-employed person, this amount Deduction for SE Tax is deductible. See Members of Religious Orders, earlier, Rev. Ashford figures the nondeductible under Social Security Coverage. You can deduct one-half of your SE tax in figur- (tax-free) portion of expenses related to his ing AGI. This is an income only, and income as follows: which is claimed on Schedule 1 (Form 1040), Foreign Earned Income line 14. ($10,000 ÷ $40,000) x $500 = $125 Certain income may be exempt from income tax Don't claim this deduction in figuring if you work in a foreign country or in a specified Required statement. If you receive a tax-free ! net earnings from self-employment U.S. territory. Pub. 54 discusses the foreign rental or parsonage allowance and have minis- CAUTION subject to SE tax. earned income exclusion. Pub. 570, Tax Guide terial expenses, attach a statement to your tax

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Income Tax Withholding you can enter into a voluntary withholding on Schedule C (Form 1040). You should then agreement with the church to cover any income carry the net amount over to line 2 of Sched- and Estimated Tax and SE tax that may be due. ule SE (Form 1040). However, if you were a duly ordained minister who was an employee of The federal income tax is a pay-as-you-go tax. a church and you must pay SE tax on the wa- You must pay the tax as you earn or receive in- ges you earned for those services, don't report come during the year. An employee usually has Filing Your Return those wages on Schedule C (Form 1040). In- income tax withheld from his or her wages or stead, report those wages less any allowable salary. However, your salary isn't subject to fed- You must file an income tax return for 2020 if expenses on line 2 of Schedule SE (Form 1040) eral income tax withholding if both of the follow- your gross income was at least the amount and attach an explanation. ing conditions apply. shown in the third column of Table 4. You are a duly ordained, commissioned, or • Exemption from SE tax. If you filed Form licensed minister, a member of a religious Additional requirements. Even if your in- 4361 and received IRS approval not to be taxed order (who hasn't taken a vow of poverty), come was less than the amount shown in Ta- on your ministerial earnings, and you don't have or a Christian Science practitioner or ble 4, you must file an income tax return on any other income subject to SE tax, don't file reader. Form 1040 or 1040-SR, and attach a completed Schedule SE (Form 1040). Instead, enter “Ex- Your salary is for ministerial services (see Schedule SE (Form 1040), if: • empt—Form 4361” on the dotted line next to Ministerial Services, earlier). • You aren't exempt from SE tax, and you have net earnings from self-employment Schedule 2 (Form 1040), line 4. However, if you If your salary isn't subject to withholding, or if (discussed earlier under Self-Employment had net earnings from another or busi- you don't pay enough tax through withholding, Tax: Figuring Net Earnings) of $400 or ness of $400 or more subject to SE tax, see line you may need to make estimated tax payments more in the tax year; A at the top of Schedule SE (Form 1040). to avoid penalties for not paying enough tax as • You are exempt from SE tax on earnings If you filed Form 4029 and received IRS ap- you earn your income. from ministerial services and you have proval not to be taxed on those earnings, and you don't have any other income subject to SE You must generally make estimated tax pay- $400 or more of other net earnings subject tax, don't file Schedule SE (Form 1040). In- ments if you expect to owe taxes, including SE to SE tax; or stead, enter “Exempt—Form 4029” on the dot- tax, of $1,000 or more, when you file your re- • You had wages of $108.28 or more from ted line next to Schedule 2 (Form 1040), line 4. turn. an electing church or church-controlled or- ganization (see Coverage of Religious Determine your estimated tax by using the Workers (Church Employees), earlier, un- More information. For more information on fil- worksheets in Pub. 505, Tax Withholding and der Social Security Coverage). ing your return, including when and where to file Estimated Tax. You can also use the IRS With- it, see the Instructions for Forms 1040 and holding Estimator at IRS.gov/W4App. Pay the Self-employment tax. For services in the ex- 1040-SR. entire estimated tax for 2021 or the first install- ercise of the ministry, members of the clergy re- ment by April 15, 2021. See Form 1040-ES for ceive a Form W-2, but do not have social secur- the different payment methods. The April 15 ity or Medicare taxes withheld. You must pay Retirement Savings date applies whether or not your tax home and social security and Medicare taxes by filing your abode are outside the United States and Schedule SE (Form 1040) with your return. Arrangements Puerto Rico. For more information, see chap- If you filed Form 4361 and didn't receive ap- ter 2 of Pub. 505. proval from the IRS, you must pay SE tax on Retirement savings arrangements are plans that offer you a tax-favored way to save for your If you perform your services as a com- your ministerial earnings, as explained earlier. You should report ministerial earnings and ex- retirement. You can generally deduct your con- mon-law employee of the church and your tributions to the plan. Your contributions and the salary isn't subject to income tax withholding, penses from nonemployee ministerial services Table 4. 2020 Filing Requirements for Most Taxpayers

AND at the end of 2020 THEN file a return if your gross income** was IF your filing status is ... you were* ... at least ...

under age 65 $12,400 Single 65 or older 14,050 under 65 (both spouses) $24,800 Married filing jointly*** 65 or older (one spouse) 26,100 65 or older (both spouses) 27,400 Married filing separately any age $5 under 65 $18,650 Head of household 65 or older 20,300 under 65 $24,800 Qualifying widow(er) 65 or older 26,100

* If you were born on January 1, 1956, you are considered to be age 65 at the end of 2020. (If your spouse died in 2020 or you are preparing a return for someone who died in 2020, see Pub. 501, Dependents, Standard Deduction, and Filing Information.) ** Gross income means all income you received in the form of money, , property, and services that isn't exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Don’t include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2020, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b) applies, see the Instructions for Forms 1040 and 1040-SR, lines 6a and 6b, to figure the taxable part of social security benefits you must include in gross income. Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7; or Schedule F (Form 1040), line 9. But, in figuring gross income, don't reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7; or Schedule F (Form 1040), line 9. *** If you didn't live with your spouse at the end of 2020 (or on the date your spouse died) and your gross income was at least $5, you must file a return regardless of your age.

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earnings on them generally aren't taxed until Deducting contributions to tax-sheltered 1. Foreign earned income, they are distributed. annuity plans. If you are an employee, your 2. Foreign housing costs, employer may exclude allowable contributions Retirement plans for the self-employed. To to a 403(b) plan from your income. These con- 3. Income of bona fide residents of American set up one of the following plans you must be tributions won't be included in your total wages Samoa, and self-employed. on your Form W-2, but you will pay tax on distri- 4. Income of bona fide residents of Puerto • SEP (simplified employee pension) plan. butions from your plan. However, if you choose Rico. • SIMPLE (savings incentive match plan for to have contributions made to a Roth contribu- employees) plan. tion program, they won't be excluded from your More information. For more information • Qualified retirement plan (also called a income, but will be distributed tax free if you about the credit, see Pub. 590-A. Keogh or H.R. 10 plan), including a 401(k) satisfy certain requirements. plan. You may also participate in a 403(b) plan if The common-law rules determine whether you are a minister or chaplain and, in the exer- Earned Income Credit you are an employee or a self-employed person cise of your ministry, you are either self-em- for purposes of setting up a retirement plan. ployed or employed by an organization that isn't (EIC) See Employment status for other tax purposes exempt from tax under section 501(c)(3) of the under Coverage of Members of the Clergy, ear- Internal Revenue Code. If either situation ap- The EIC is a tax credit for certain people who lier. This result is true even if your compensa- plies to you, you can deduct your contributions work. If you qualify for it, the EIC reduces the tion for ministerial services (defined earlier) is to a 403(b) plan as explained next. tax you owe. The EIC may give you a refund subject to SE tax. • If you are self-employed, deduct your con- even if you don't owe any tax. tributions on Schedule 1 (Form 1040), For example, if a congregation pays you a line 15. You can't take the credit for 2020 if your salary for performing ministerial services and If you aren't self-employed and your em- earned income (or ) is: you are subject to the congregation's control, • ployer doesn't exclude your contributions • $15,820 or more ($21,710 or more if mar- you are generally a common-law employee. from your earned income, deduct your ried filing jointly) and you don't have a You aren't a self-employed person for purposes contributions on Schedule 1 (Form 1040), qualifying child, of setting up a retirement plan. This result is true line 22. Enter the amount of your deduction • $41,756 or more ($47,646 or more if mar- even if your salary is subject to SE tax. and “403(b)” on the dotted line next to ried filing jointly) and you have one qualify- On the other hand, amounts received di- line 22. ing child, rectly from members of the congregation, such • $47,440 or more ($53,330 or more if mar- as fees for performing marriages, baptisms, or Retirement savings contributions credit. ried filing jointly) and you have two qualify- other personal services that you report on You may be able to take a tax credit of up to ing children, or Schedule C (Form 1040), are earnings from $1,000 (up to $2,000 if filing jointly) for certain • $50,954 or more ($56,844 if married filing self-employment for all tax purposes. contributions you make to any of the retirement jointly) and you have three or more qualify- For more information on establishing a SEP, plans or IRAs discussed earlier. The credit is ing children. SIMPLE, or qualified retirement plan, see Pub. based on the contributions you make and your 560, Retirement Plans for Small Business. credit rate. Your credit rate can be as low as Earned income. Earned income includes 10% or as high as 50%, depending on your fil- your: Individual retirement arrangements (IRAs). ing status and AGI. Figure the credit on Form 1. Wages, salaries, tips, and other taxable The traditional IRA and the Roth IRA are two in- 8880, Credit for Qualified Retirement Savings employee compensation (even if these dividual retirement arrangements you can use Contributions. amounts are exempt from FICA or SECA to save money for your retirement. Generally, You can't take the credit if any of the follow- under an approved Form 4029 or 4361); your maximum contribution for 2020 to either of ing apply. and these plans (or to a combination of the two) is the smaller of your taxable compensation or 1. You were born after January 1, 2003. 2. Net earnings from self-employment that $6,000 ($7,000 if you are age 50 or older by the 2. You were a student who during any part of are not exempt from SECA (you don't end of 2020). 5 calendar months (not necessarily con- have an approved Form 4029 or 4361) However, your maximum contribution to a secutive) of 2020: that you report on Schedule SE (Form Roth IRA will be further reduced or eliminated if 1040), line 3, with the following adjust- your AGI is above a certain amount. You can't a. Was enrolled as a full-time student at ments. deduct Roth IRA contributions, but if you satisfy a school; or a. Subtract the amount you claimed (or certain requirements, all earnings in the Roth b. Took a full-time, on-farm training should have claimed) on Schedule 1 IRA are tax free and neither your nondeductible course given by a school or a state, (Form 1040), line 14, for the deducti- contributions nor any earnings on them are tax- county, or local government agency. ble part of your SE tax. able when distributed. 3. Someone, such as your parent(s), claims If you contribute to a traditional IRA, your b. Add any amount from Schedule SE an exemption for you on his or her 2020 contribution may be deductible. However, your (Form 1040), line 4b and line 5a. tax return. deduction may be reduced or eliminated if you or your spouse is covered by an employer re- 4. Your AGI for 2020 is more than: Election to use prior-year earned income. tirement plan (including, but not limited to, a You can elect to use your 2019 earned income a. $65,000, if your filing status is married to figure your 2020 earned income credit (EIC) SEP, SIMPLE, or qualified retirement plan). filing jointly; For more information on IRAs, see Pub. if your 2019 earned income is more than your 590-A, Contributions to Individual Retirement b. $48,750, if your filing status is head of 2020 earned income. To make this election, en- Arrangements. household; or ter “PYEI” and the amount of your 2019 earned income on the dotted line next to Form 1040 or c. $32,500, if your filing status is single, 1040-SR, line 27. Tax-sheltered annuity plans. Church em- married filing separately, or qualifying ployees, members of religious orders, and duly widow(er). If you file a joint return and make the elec- ordained, commissioned, or licensed ministers tion. your 2019 earned income is the sum of working as ministers or can generally Full-time student. You are a full-time stu- your 2019 earned income and your spouse’s participate in tax-sheltered annuity (403(b)) dent if you are enrolled for the number of hours 2019 earned income. plans. For more information, see Pub. 571, or courses the school considers to be full time. To figure your EIC, see the Instructions for Tax-Sheltered Annuity Plans. Forms 1040 and 1040-SR for line 27. AGI. When figuring AGI, you must add back any exclusion or deduction claimed for the year for:

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If you are a minister and have an ap- More information. For detailed rules on this ! proved Form 4361, your earned in- credit, see Pub. 596. To figure the amount of CAUTION come will still include wages and salar- your credit, you can either fill out a worksheet or ies earned as an employee, but it will not have the IRS figure the credit for you. You may include amounts you received for nonemployee need to complete Schedule EIC (Form 1040) ministerial duties, such as fees for performing and attach it to your tax return. marriages and baptisms, and honoraria for de- livering speeches.

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Worksheets

These worksheets are provided to help you figure your taxable ministerial income, your allowable deductions, and your net self-employment income.

Worksheet 1. Figuring the Percentage of Tax-Free Income Note. For each line, enter the appropriate amount in all boxes that aren't shaded.

(a) (b) (c) Source of Income Taxable Tax-free Total 1 W-2 salary as a minister (from box 1 of Form W-2) 1 Gross income from weddings, baptisms, writing, lecturing, etc. (from line 1 of 2 2 Schedule C)

Note. Complete either lines 3a through 3e or lines 4a through 4i. • If your church provides you with a parsonage, complete lines 3a through 3e. • If, instead of providing a parsonage, your church provides you with a rental or parsonage allowance, complete lines 4a through 4i. 3a FRV* of parsonage provided by church 3a b Utility allowance, if any 3b c Actual expenses for utilities 3c d Enter the smaller of line 3b or 3c 3d e Excess utility allowance (subtract line 3d from line 3b) 3e 4a Parsonage or rental allowance 4a b Utility allowance, if separate 4b c Total allowance (add lines 4a and 4b) 4c d Actual expenses for parsonage 4d e Actual expenses for utilities 4e Total actual expenses for parsonage and utilities (add lines 4d f 4f and 4e) g FRV* of home, plus the cost of utilities 4g h Enter the smaller of line 4c, 4f, or 4g 4h i Excess allowance (subtract line 4h from line 4c) 4i Ministerial income (for columns (a), (b), and (c), add lines 1 5 5 through 4i) 6 Percentage of tax-free income: Total tax-free income (line 5(b)) $ = %** Total income (line 5(c)) $ * FRV (Fair Rental Value): As determined objectively and between unrelated parties, what it would cost to rent a comparable home (including furnishings) in a similar location. ** This percentage of your ministerial expenses won't be deductible. Use Worksheets 2 and 3 to figure your allowable deductions.

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Worksheet 2. Figuring the Allowable Deduction for Schedule C Expenses

1 Percentage of expenses that are nondeductible (from Worksheet 1, line 6): % 2 Business use of car for entire year: miles x 57.5 cents ($0.575) 2 3 Meals: $ × 50% (0.50) 3

4 Other expenses (list item and amount) a 4a b 4b c 4c d 4d e 4e f Total other expenses (add lines 4a through 4e) 4f 5 Total Schedule C expenses (add lines 2, 3, and 4f) 5 6 Nondeductible part of Schedule C expenses (multiply line 5 by the percent in line 1) 6 7 Deduction allowed.* Subtract line 6 from line 5. Enter the result here and on Schedule C, line 27a. 7 * None of the other deductions claimed in this return are allocable to tax-free income.

Worksheet 3. Figuring Net Self-Employment Income for Schedule SE (Form 1040)

1 W-2 salary as a minister (from box 1 of Form W-2) 1 2 Net profit from Schedule C, line 31 2 3a Parsonage or rental allowance (from Worksheet 1, line 3a or 4a) 3a b Utility allowance (from Worksheet 1, line 3b or 4b) 3b c Total allowance (add lines 3a and 3b) 3c 4 Add lines 1, 2, and 3c 4 5 Schedule C expenses allocable to tax-free income (from Worksheet 2, line 6) 5 6 Total unreimbursed employee business expenses 6 7 Total business expenses not deducted in lines 1 and 2 above (add lines 5 and 6) 7 Net self-employment income. Subtract line 7 from line 4. Enter here and on Schedule SE (Form 8 8 1040), line 2.

ble forms. However, state tax preparation Also, the IRS offers Free Fillable Forms, may not be available through Free File. Go which can be completed online and then filed How To Get Tax Help to IRS.gov/FreeFile to see if you qualify for electronically regardless of income. free online federal tax preparation, e-filing, If you have questions about a tax issue, need and or payment options. Using online tools to help prepare your re- help preparing your tax return, or want to down- • VITA. The Volunteer Income Tax Assis- turn. Go to IRS.gov/Tools for the following. load free publications, forms, or instructions, go tance (VITA) program offers free tax help • The Earned Income Tax Credit Assistant to IRS.gov and find resources that can help you to people with low-to-moderate , (IRS.gov/EITCAssistant) determines if right away. persons with , and limited-Eng- you’re eligible for the earned income credit lish-speaking taxpayers who need help (EIC). Preparing and filing your tax return. After preparing their own tax returns. Go to • The Online EIN Application (IRS.gov/EIN) receiving all your wage and earning statements IRS.gov/VITA, download the free IRS2Go helps you get an employer identification (Form W-2, W-2G, 1099-R, 1099-MISC, app, or call 800-906-9887 for information number (EIN). 1099-NEC, etc.); compensation on free tax return preparation. • The Tax Withholding Estimator (IRS.gov/ statements (by mail or in a digital format) or • TCE. The Tax Counseling for the Elderly W4App) makes it easier for everyone to other government payment statements (Form (TCE) program offers free tax help for all pay the correct amount of tax during the 1099-G); and interest, , and retirement taxpayers, particularly those who are 60 year. The tool is a convenient, online way statements from banks and investment firms years of age and older. TCE volunteers to check and tailor your withholding. It’s (Forms 1099), you have several options to specialize in answering questions about more user-friendly for taxpayers, including choose from to prepare and file your tax return. pensions and retirement-related issues You can prepare the tax return yourself, see if unique to seniors. Go to IRS.gov/TCE, you qualify for free tax preparation, or hire a tax download the free IRS2Go app, or call professional to prepare your return. 888-227-7669 for information on free tax return preparation. Free options for tax preparation. Go to • MilTax. Members of the U.S. Armed IRS.gov to see your options for preparing and Forces and qualified veterans may use Mil- filing your return online or in your local commun- Tax, a free tax service offered by the De- ity, if you qualify, which include the following. partment of Defense through Military One- • Free File. This program lets you prepare Source. and file your federal individual income tax return for free using brand- tax-prep- aration-and-filing software or Free File filla-

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retirees and self-employed individuals. The information and updates on how this legislation taxpayers use direct deposit to receive their re- features include the following. affects your taxes. funds. The IRS issues more than 90% of re- – Easy to understand language. funds in less than 21 days. – The ability to switch between screens, Employers can register to use Business correct previous entries, and skip Services Online. The Social Security Adminis- Getting a transcript of your return. The screens that don’t apply. tration (SSA) offers online service at SSA.gov/ quickest way to get a copy of your tax transcript – Tips and links to help you determine if employer for fast, free, and secure online W-2 is to go to IRS.gov/Transcripts. Click on either you qualify for tax credits and deduc- filing options to CPAs, accountants, enrolled "Get Transcript Online" or "Get Transcript by tions. agents, and individuals who process Form W-2, Mail" to order a copy of your transcript. If you – A tracker. Wage and Tax Statement, and Form W-2c, prefer, you can order your transcript by calling – A self-employment tax feature. Corrected Wage and Tax Statement. 800-908-9946. – Automatic calculation of taxable social security benefits. IRS social media. Go to IRS.gov/SocialMedia Reporting and resolving your tax-related • The First Time Homebuyer Credit Account to see the various social media tools the IRS identity theft issues. Look-up (IRS.gov/HomeBuyer) tool pro- uses to share the latest information on tax • Tax-related identity theft happens when vides information on your repayments and changes, scam alerts, initiatives, products, and someone steals your personal information account balance. services. At the IRS, privacy and security are to commit tax fraud. Your taxes can be af- • The Deduction Calculator paramount. We use these tools to share public fected if your SSN is used to file a fraudu- (IRS.gov/SalesTax) figures the amount you information with you. 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On IRS.gov, you can get vide short, informative videos on various tax-re- cludes requests for personal identification up-to-date information on current lated topics in English, Spanish, and ASL. numbers (PINs), passwords, or similar in- events and changes in . • Youtube.com/irsvideos. formation for credit cards, banks, or other financial accounts. • IRS.gov/Help: A variety of tools to help you • Youtube.com/irsvideosmultilingua. get answers to some of the most common • Go to IRS.gov/IdentityTheft, the IRS Iden- tax questions. • Youtube.com/irsvideosASL. tity Theft Central webpage, for information • IRS.gov/ITA: The Interactive Tax Assistant, on identity theft and data security protec- a tool that will ask you questions on a num- Watching IRS videos. The IRS Video portal tion for taxpayers, tax professionals, and ber of tax law topics and provide answers. (IRSvideos.gov) contains video and audio pre- businesses. If your SSN has been lost or • IRS.gov/Forms: Find forms, instructions, sentations for individuals, small businesses, stolen or you suspect you’re a victim of and publications. You will find details on and tax professionals. tax-related identity theft, you can learn 2020 tax changes and hundreds of interac- what steps you should take. tive links to help you find answers to your Online tax information in other languages. • Get an Identity Protection PIN (IP PIN). IP questions. You can find information on IRS.gov/ PINs are six-digit numbers assigned to eli- • You may also be able to access tax law in- MyLanguage if English isn’t your native lan- gible taxpayers to help prevent the misuse formation in your electronic filing software. guage. of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it Free interpreter service. Multilingual assis- prevents someone else from filing a tax re- Need someone to prepare your tax return? tance, provided by the IRS, is available at Tax- turn with your SSN. To learn more, go to There are various types of tax return preparers, payer Assistance Centers (TACs) and other IRS.gov/IPPIN. including tax preparers, enrolled agents, certi- IRS offices. Over-the-phone interpreter service fied public accountants (CPAs), attorneys, and is accessible in more than 350 languages. Checking on the status of your refund. many others who don’t have professional cre- • Go to IRS.gov/Refunds. dentials. If you choose to have someone pre- Getting tax forms and publications. Go to • The IRS can’t issue refunds before pare your tax return, choose that preparer IRS.gov/Forms to view, download, or print all of mid-February 2021 for returns that claimed wisely. 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Eight in 10 phone, or by mobile device.

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• Electronic Funds Withdrawal: Offered only find additional information about responding to you throughout the process and will do every- when filing your federal taxes using tax re- an IRS notice or letter. thing possible to resolve your issue. TAS can turn preparation software or through a tax help you if: professional. Contacting your local IRS office. Keep in • Your problem is causing financial difficulty • Electronic Federal Tax Payment System: mind, many questions can be answered on for you, your family, or your business; Best option for businesses. Enrollment is IRS.gov without visiting an IRS Taxpayer Assis- • You face (or your business is facing) an required. tance Center (TAC). Go to IRS.gov/LetUsHelp immediate threat of adverse action; or • Check or Money Order: Mail your payment for the topics people ask about most. If you still • You’ve tried repeatedly to contact the IRS to the address listed on the notice or in- need help, IRS TACs provide tax help when a but no one has responded, or the IRS structions. tax issue can’t be handled online or by phone. hasn’t responded by the date promised. • Cash: You may be able to pay your taxes All TACs now provide service by appointment, at a participating retail store. so you’ll know in advance that you can get the How Can You Reach TAS? • Same-Day Wire: You may be able to do service you need without long wait times. Be- same-day wire from your financial institu- fore you visit, go to IRS.gov/TACLocator to find TAS has offices in every state, the District of tion. Contact your financial institution for the nearest TAC and to check hours, available Columbia, and Puerto Rico. Your local advo- availability, cost, and cut-off times. services, and appointment options. Or, on the cate’s number is in your local directory and at IRS2Go app, under the Stay Connected tab, TaxpayerAdvocate.IRS.gov/Contact-Us. You What if I can’t pay now? Go to IRS.gov/ choose the Contact Us option and click on “Lo- can also call them at 877-777-4778. Payments for more information about your op- cal Offices.” tions. • Apply for an online payment agreement How Else Does TAS Help (IRS.gov/OPA) to meet your tax obligation The Taxpayer Advocate Taxpayers? in monthly installments if you can’t pay Service (TAS) Is Here To your taxes in full today. Once you complete Help You TAS works to resolve large-scale problems that the online process, you will receive imme- affect many taxpayers. If you know of one of diate notification of whether your agree- What Is TAS? these broad issues, please report it to them at ment has been approved. IRS.gov/SAMS. TAS is an independent organization within the Use the Offer in Compromise Pre-Qualifier • IRS that helps taxpayers and protects taxpayer to see if you can settle your tax debt for TAS for Tax Professionals rights. Their job is to ensure that every taxpayer less than the full amount you owe. For is treated fairly and that you know and under- more information on the Offer in Compro- TAS can provide a variety of information for tax stand your rights under the Taxpayer Bill of mise program, go to IRS.gov/OIC. professionals, including tax law updates and Rights. guidance, TAS programs, and ways to let TAS Filing an amended return. You can now file know about systemic problems you’ve seen in Form 1040-X electronically with tax filing soft- How Can You Learn About Your your practice. ware to amend 2019 Forms 1040 and 1040-SR. Taxpayer Rights? To do so, you must have e-filed your original Low Income Taxpayer 2019 return. Amended returns for all prior years The Taxpayer Bill of Rights describes 10 basic must be mailed. See Tips for taxpayers who rights that all taxpayers have when dealing with Clinics (LITCs) need to file an amended tax return and go to the IRS. Go to TaxpayerAdvocate.IRS.gov to IRS.gov/Form1040X for information and up- help you understand what these rights mean to LITCs are independent from the IRS. LITCs dates. you and how they apply. These are your rights. represent individuals whose income is below a Know them. Use them. certain level and need to resolve tax problems Checking the status of your amended re- with the IRS, such as audits, appeals, and tax turn. Go to IRS.gov/WMAR to track the status What Can TAS Do For You? collection disputes. In addition, clinics can pro- of Form 1040-X amended returns. Please note vide information about taxpayer rights and re- that it can take up to 3 weeks from the date you TAS can help you resolve problems that you sponsibilities in different languages for individu- filed your amended return for it to show up in can’t resolve with the IRS. And their service is als who speak English as a second language. our system, and processing it can take up to 16 free. If you qualify for their assistance, you will Services are offered for free or a small fee. To weeks. be assigned to one advocate who will work with find a clinic near you, visit TaxpayerAdvocate.IRS.gov/About-Us/Low- Understanding an IRS notice or letter Income-Taxpayer-Clinics-LITC/ or see IRS Pub. you’ve received. Go to IRS.gov/Notices to 4134, Low Income Taxpayer Clinic List.

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

To help us develop a more useful index, please let us know if you have ideas for index entries. Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Effective date of exemption 7 Religious orders, members of 2, A Election to exclude church L 4–6, 10 Accountable plan 8 employees 4 Lay employees (See Religious Religious workers 2, 4 Additional Medicare Tax 2, 8 Filing requirements for most workers) Rental allowance 7, 9, 10 Administrators 10 taxpayers 11 Living abroad 8, 10 Resident aliens 4 American Samoa 4, 8 Foreign earned income 10 Retired ministers 9 Assistance (See Tax help) Form: Retirement savings 1040-ES 11 M arrangements 11 1040 or 1040-SR 9–11 Members of recognized religious Retirement savings contributions C 1040-X 6, 7 sects 2, 6 credit 12 Cantors 10 4029 5, 7, 11 Members of religious orders 2, Royalty income from books 5 Christian Science: 4361 5, 6, 11 4–6, 10 Practitioners 2, 4–6 8959 3, 8 Ministerial services, exemption Readers 2, 4, 5 941 7 for: S Common-law employee 4 943 7 Christian Science practitioners SECA 2, 3 Commonwealth of the Northern 944 7 and readers 5 Sects, members of recognized Mariana Islands (CNMI) 4, 8 SS-8 4 Members of religious orders 5 religious 2, 6 Credit: Ministers 5 Self-employment, net earnings Earned income 12 Ministers 2–6, 9–11 from 7–9 Retirement savings G Health insurance costs of 10 Self-Employment Contributions contributions 12 Gross income: Retired 9 Act (See SECA) Amounts included in 7 Missionary team, married Self-employment tax: Amounts not included in 8 couple 8 Deduction 10 D Guam 4, 8 Exemption 6, 7, 11 Deduction for self-employment Maximum earnings 8 tax 10 N Nonfarm optional method 8 H Nonaccountable plan 8 Refunds of 6, 7 Health insurance costs, Nonfarm optional method 8 Regular method 7 E deductibility 10 Nonresident aliens 4 SIMPLE plan 12 Earned income credit 12 Home ownership, exclusion of Simplified employee pension Effective date: allowance 9, 10 (SEP) plan 12 Exemption from FICA taxes 7 House or parsonage, fair rental O Social security coverage 3 Exemption from self-employment value 9 Offerings and fees 7, 9 (SE) tax 6, 7 Overseas duty 8, 10 Employment status 4 T Estimated tax 11 I Tax-free income, deductibility of Exclusion, foreign earned Identity theft 16 P expenses 10 income 10 Income tax: Parsonage allowance 7, 9, 10 Tax help 15 Exemption: Estimated tax 11 Publications (See Tax help) Tax-sheltered annuity plans 12 Form 4029 5, 7 Income and expenses 9–11 Puerto Rico 4, 8 Teachers 10 Form 4361 5, 6 Withholding 11 Theological students 10 From FICA taxes 7 Individual retirement Traveling evangelists 10 From self-employment (SE) arrangements (IRAs) 12 Q tax 6, 7 Qualified retirement plan 12 U K U.S. citizens 4 F Keogh (H.R.10) plans 12 R U.S. Virgin Islands 4, 8 Federal Insurance Contributions Refunds, self-employment tax 6, Act (See FICA) 7 FICA: Reimbursements 8 V Earnings covered 2 Vow of poverty 2, 4–6, 10

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