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Filing 2011 Tax Return In 2013

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Filing 2011 Tax Return In 2013

Filing 2011 tax return in 2013 1. Filing 2011 tax return in 2013   Definitions You Need To Know Table of Contents Other options. Filing 2011 tax return in 2013 Exception. Filing 2011 tax return in 2013 Certain terms used in this publication are defined below. Filing 2011 tax return in 2013 The same term used in another publication may have a slightly different meaning. Filing 2011 tax return in 2013 Annual additions. Filing 2011 tax return in 2013   Annual additions are the total of all your contributions in a year, employee contributions (not including rollovers), and forfeitures allocated to a participant's account. Filing 2011 tax return in 2013 Annual benefits. Filing 2011 tax return in 2013   Annual benefits are the benefits to be paid yearly in the form of a straight life annuity (with no extra benefits) under a plan to which employees do not contribute and under which no rollover contributions are made. Filing 2011 tax return in 2013 Business. Filing 2011 tax return in 2013   A business is an activity in which a profit motive is present and economic activity is involved. Filing 2011 tax return in 2013 Service as a newspaper carrier under age 18 or as a public official is not a business. Filing 2011 tax return in 2013 Common-law employee. Filing 2011 tax return in 2013   A common-law employee is any individual who, under common law, would have the status of an employee. Filing 2011 tax return in 2013 A leased employee can also be a common-law employee. Filing 2011 tax return in 2013   A common-law employee is a person who performs services for an employer who has the right to control and direct the results of the work and the way in which it is done. Filing 2011 tax return in 2013 For example, the employer: Provides the employee's tools, materials, and workplace, and Can fire the employee. Filing 2011 tax return in 2013   Common-law employees are not self-employed and cannot set up retirement plans for income from their work, even if that income is self-employment income for social security tax purposes. Filing 2011 tax return in 2013 For example, common-law employees who are ministers, members of religious orders, full-time insurance salespeople, and U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 citizens employed in the United States by foreign governments cannot set up retirement plans for their earnings from those employments, even though their earnings are treated as self-employment income. Filing 2011 tax return in 2013   However, an individual may be a common-law employee and a self-employed person as well. Filing 2011 tax return in 2013 For example, an attorney can be a corporate common-law employee during regular working hours and also practice law in the evening as a self-employed person. Filing 2011 tax return in 2013 In another example, a minister employed by a congregation for a salary is a common-law employee even though the salary is treated as self-employment income for social security tax purposes. Filing 2011 tax return in 2013 However, fees reported on Schedule C (Form 1040), Profit or Loss From Business, for performing marriages, baptisms, and other personal services are self-employment earnings for qualified plan purposes. Filing 2011 tax return in 2013 Compensation. Filing 2011 tax return in 2013   Compensation for plan allocations is the pay a participant received from you for personal services for a year. Filing 2011 tax return in 2013 You can generally define compensation as including all the following payments. Filing 2011 tax return in 2013 Wages and salaries. Filing 2011 tax return in 2013 Fees for professional services. Filing 2011 tax return in 2013 Other amounts received (cash or noncash) for personal services actually rendered by an employee, including, but not limited to, the following items. Filing 2011 tax return in 2013 Commissions and tips. Filing 2011 tax return in 2013 Fringe benefits. Filing 2011 tax return in 2013 Bonuses. Filing 2011 tax return in 2013   For a self-employed individual, compensation means the earned income, discussed later, of that individual. Filing 2011 tax return in 2013   Compensation generally includes amounts deferred in the following employee benefit plans. Filing 2011 tax return in 2013 These amounts are elective deferrals. Filing 2011 tax return in 2013 Qualified cash or deferred arrangement (section 401(k) plan). Filing 2011 tax return in 2013 Salary reduction agreement to contribute to a tax-sheltered annuity (section 403(b) plan), a SIMPLE IRA plan, or a SARSEP. Filing 2011 tax return in 2013 Section 457 nonqualified deferred compensation plan. Filing 2011 tax return in 2013 Section 125 cafeteria plan. Filing 2011 tax return in 2013   However, an employer can choose to exclude elective deferrals under the above plans from the definition of compensation. Filing 2011 tax return in 2013 The limit on elective deferrals is discussed in chapter 2 under Salary Reduction Simplified Employee Pension (SARSEP) and in chapter 4. Filing 2011 tax return in 2013 Other options. Filing 2011 tax return in 2013   In figuring the compensation of a participant, you can treat any of the following amounts as the employee's compensation. Filing 2011 tax return in 2013 The employee's wages as defined for income tax withholding purposes. Filing 2011 tax return in 2013 The employee's wages you report in box 1 of Form W-2, Wage and Tax Statement. Filing 2011 tax return in 2013 The employee's social security wages (including elective deferrals). Filing 2011 tax return in 2013   Compensation generally cannot include either of the following items. Filing 2011 tax return in 2013 Nontaxable reimbursements or other expense allowances. Filing 2011 tax return in 2013 Deferred compensation (other than elective deferrals). Filing 2011 tax return in 2013 SIMPLE plans. Filing 2011 tax return in 2013   A special definition of compensation applies for SIMPLE plans. Filing 2011 tax return in 2013 See chapter 3. Filing 2011 tax return in 2013 Contribution. Filing 2011 tax return in 2013   A contribution is an amount you pay into a plan for all those participating in the plan, including self-employed individuals. Filing 2011 tax return in 2013 Limits apply to how much, under the contribution formula of the plan, can be contributed each year for a participant. Filing 2011 tax return in 2013 Deduction. Filing 2011 tax return in 2013   A deduction is the plan contributions you can subtract from gross income on your federal income tax return. Filing 2011 tax return in 2013 Limits apply to the amount deductible. Filing 2011 tax return in 2013 Earned income. Filing 2011 tax return in 2013   Earned income is net earnings from self-employment, discussed later, from a business in which your services materially helped to produce the income. Filing 2011 tax return in 2013   You can also have earned income from property your personal efforts helped create, such as royalties from your books or inventions. Filing 2011 tax return in 2013 Earned income includes net earnings from selling or otherwise disposing of the property, but it does not include capital gains. Filing 2011 tax return in 2013 It includes income from licensing the use of property other than goodwill. Filing 2011 tax return in 2013   Earned income includes amounts received for services by self-employed members of recognized religious sects opposed to social security benefits who are exempt from self-employment tax. Filing 2011 tax return in 2013   If you have more than one business, but only one has a retirement plan, only the earned income from that business is considered for that plan. Filing 2011 tax return in 2013 Employer. Filing 2011 tax return in 2013   An employer is generally any person for whom an individual performs or did perform any service, of whatever nature, as an employee. Filing 2011 tax return in 2013 A sole proprietor is treated as his or her own employer for retirement plan purposes. Filing 2011 tax return in 2013 However, a partner is not an employer for retirement plan purposes. Filing 2011 tax return in 2013 Instead, the partnership is treated as the employer of each partner. Filing 2011 tax return in 2013 Highly compensated employee. Filing 2011 tax return in 2013   A highly compensated employee is an individual who: Owned more than 5% of the interest in your business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from you of more than $115,000 (if the preceding year is 2012, 2013, or 2014) and, if you so choose, was in the top 20% of employees when ranked by compensation. Filing 2011 tax return in 2013 Leased employee. Filing 2011 tax return in 2013   A leased employee who is not your common-law employee must generally be treated as your employee for retirement plan purposes if he or she does all the following. Filing 2011 tax return in 2013 Provides services to you under an agreement between you and a leasing organization. Filing 2011 tax return in 2013 Has performed services for you (or for you and related persons) substantially full time for at least 1 year. Filing 2011 tax return in 2013 Performs services under your primary direction or control. Filing 2011 tax return in 2013 Exception. Filing 2011 tax return in 2013   A leased employee is not treated as your employee if all the following conditions are met. Filing 2011 tax return in 2013 Leased employees are not more than 20% of your non-highly compensated work force. Filing 2011 tax return in 2013 The employee is covered under the leasing organization's qualified pension plan. Filing 2011 tax return in 2013 The leasing organization's plan is a money purchase pension plan that has all the following provisions. Filing 2011 tax return in 2013 Immediate participation. Filing 2011 tax return in 2013 (This requirement does not apply to any individual whose compensation from the leasing organization in each plan year during the 4-year period ending with the plan year is less than $1,000. Filing 2011 tax return in 2013 ) Full and immediate vesting. Filing 2011 tax return in 2013 A nonintegrated employer contribution rate of at least 10% of compensation for each participant. Filing 2011 tax return in 2013 However, if the leased employee is your common-law employee, that employee will be your employee for all purposes, regardless of any pension plan of the leasing organization. Filing 2011 tax return in 2013 Net earnings from self-employment. Filing 2011 tax return in 2013   For SEP and qualified plans, net earnings from self-employment is your gross income from your trade or business (provided your personal services are a material income-producing factor) minus allowable business deductions. Filing 2011 tax return in 2013 Allowable deductions include contributions to SEP and qualified plans for common-law employees and the deduction allowed for the deductible part of your self-employment tax. Filing 2011 tax return in 2013   Net earnings from self-employment does not include items excluded from gross income (or their related deductions) other than foreign earned income and foreign housing cost amounts. Filing 2011 tax return in 2013   For the deduction limits, earned income is net earnings for personal services actually rendered to the business. Filing 2011 tax return in 2013 You take into account the income tax deduction for the deductible part of self-employment tax and the deduction for contributions to the plan made on your behalf when figuring net earnings. Filing 2011 tax return in 2013   Net earnings include a partner's distributive share of partnership income or loss (other than separately stated items, such as capital gains and losses). Filing 2011 tax return in 2013 It does not include income passed through to shareholders of S corporations. Filing 2011 tax return in 2013 Guaranteed payments to limited partners are net earnings from self-employment if they are paid for services to or for the partnership. Filing 2011 tax return in 2013 Distributions of other income or loss to limited partners are not net earnings from self-employment. Filing 2011 tax return in 2013   For SIMPLE plans, net earnings from self-employment is the amount on line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040), Self-Employment Tax, before subtracting any contributions made to the SIMPLE plan for yourself. Filing 2011 tax return in 2013 Qualified plan. Filing 2011 tax return in 2013   A qualified plan is a retirement plan that offers a tax-favored way to save for retirement. Filing 2011 tax return in 2013 You can deduct contributions made to the plan for your employees. Filing 2011 tax return in 2013 Earnings on these contributions are generally tax free until distributed at retirement. Filing 2011 tax return in 2013 Profit-sharing, money purchase, and defined benefit plans are qualified plans. Filing 2011 tax return in 2013 A 401(k) plan is also a qualified plan. Filing 2011 tax return in 2013 Participant. Filing 2011 tax return in 2013   A participant is an eligible employee who is covered by your retirement plan. Filing 2011 tax return in 2013 See the discussions of the different types of plans for the definition of an employee eligible to participate in each type of plan. Filing 2011 tax return in 2013 Partner. Filing 2011 tax return in 2013   A partner is an individual who shares ownership of an unincorporated trade or business with one or more persons. Filing 2011 tax return in 2013 For retirement plans, a partner is treated as an employee of the partnership. Filing 2011 tax return in 2013 Self-employed individual. Filing 2011 tax return in 2013   An individual in business for himself or herself, and whose business is not incorporated, is self-employed. Filing 2011 tax return in 2013 Sole proprietors and partners are self-employed. Filing 2011 tax return in 2013 Self-employment can include part-time work. Filing 2011 tax return in 2013   Not everyone who has net earnings from self-employment for social security tax purposes is self-employed for qualified plan purposes. Filing 2011 tax return in 2013 See Common-law employee and Net earnings from self-employment , earlier. Filing 2011 tax return in 2013   In addition, certain fishermen may be considered self-employed for setting up a qualified plan. Filing 2011 tax return in 2013 See Publication 595, Capital Construction Fund for Commercial Fishermen, for the special rules used to determine whether fishermen are self-employed. Filing 2011 tax return in 2013 Sole proprietor. Filing 2011 tax return in 2013   A sole proprietor is an individual who owns an unincorporated business by himself or herself, including a single member limited liability company that is treated as a disregarded entity for tax purposes. Filing 2011 tax return in 2013 For retirement plans, a sole proprietor is treated as both an employer and an employee. Filing 2011 tax return in 2013 Prev  Up  Next   Home   More Online Publications
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The Filing 2011 Tax Return In 2013

Filing 2011 tax return in 2013 Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. Filing 2011 tax return in 2013 Full-time student. Filing 2011 tax return in 2013 Adjusted gross income. Filing 2011 tax return in 2013 More information. Filing 2011 tax return in 2013 Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). Filing 2011 tax return in 2013 Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. Filing 2011 tax return in 2013 Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. Filing 2011 tax return in 2013 You are a member of a religious order who has taken a vow of poverty. Filing 2011 tax return in 2013 You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. Filing 2011 tax return in 2013 See Exemption From Self-Employment (SE) Tax , later. Filing 2011 tax return in 2013 You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. Filing 2011 tax return in 2013 For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. Filing 2011 tax return in 2013 Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. Filing 2011 tax return in 2013 See Ministerial Services , later. Filing 2011 tax return in 2013 Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. Filing 2011 tax return in 2013 However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. Filing 2011 tax return in 2013 For the specific services covered, see Ministerial Services , later. Filing 2011 tax return in 2013 Ministers defined. Filing 2011 tax return in 2013   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Filing 2011 tax return in 2013 Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. Filing 2011 tax return in 2013   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. Filing 2011 tax return in 2013 Employment status for other tax purposes. Filing 2011 tax return in 2013   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. Filing 2011 tax return in 2013 For income tax or retirement plan purposes, your income earned as an employee will be considered wages. Filing 2011 tax return in 2013 Common-law employee. Filing 2011 tax return in 2013   Under common-law rules, you are considered either an employee or a self-employed person. Filing 2011 tax return in 2013 Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. Filing 2011 tax return in 2013 For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. Filing 2011 tax return in 2013   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. Filing 2011 tax return in 2013 However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 A church hires and pays you a salary to perform ministerial services subject to its control. Filing 2011 tax return in 2013 Under the common-law rules, you are an employee of the church while performing those services. Filing 2011 tax return in 2013 Form SS-8. Filing 2011 tax return in 2013   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. Filing 2011 tax return in 2013 Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. Filing 2011 tax return in 2013 See Ministerial Services , later. Filing 2011 tax return in 2013 However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Filing 2011 tax return in 2013 Vow of poverty. Filing 2011 tax return in 2013   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. Filing 2011 tax return in 2013 You do not need to request a separate exemption. Filing 2011 tax return in 2013 For income tax purposes, the earnings are tax free to you. Filing 2011 tax return in 2013 Your earnings are considered the income of the religious order. Filing 2011 tax return in 2013 Services covered under FICA at the election of the order. Filing 2011 tax return in 2013   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Filing 2011 tax return in 2013 Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. Filing 2011 tax return in 2013   The order or subdivision elects coverage by filing Form SS-16. Filing 2011 tax return in 2013 The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. Filing 2011 tax return in 2013 If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. Filing 2011 tax return in 2013 You do not pay any of the FICA tax. Filing 2011 tax return in 2013 Services performed outside the order. Filing 2011 tax return in 2013   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. Filing 2011 tax return in 2013   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. Filing 2011 tax return in 2013 You may, however, be able to take a charitable deduction for the amount you turn over to the order. Filing 2011 tax return in 2013 See Publication 526, Charitable Contributions. Filing 2011 tax return in 2013 Rulings. Filing 2011 tax return in 2013   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. Filing 2011 tax return in 2013 To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. Filing 2011 tax return in 2013 R. Filing 2011 tax return in 2013 B. Filing 2011 tax return in 2013 1, available at www. Filing 2011 tax return in 2013 irs. Filing 2011 tax return in 2013 gov/irb/2014-1_IRB/ar05. Filing 2011 tax return in 2013 html. Filing 2011 tax return in 2013 Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. Filing 2011 tax return in 2013 However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Filing 2011 tax return in 2013 Practitioners. Filing 2011 tax return in 2013   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. Filing 2011 tax return in 2013 State law specifically exempts Christian Science practitioners from licensing requirements. Filing 2011 tax return in 2013   Some Christian Science practitioners also are Christian Science teachers or lecturers. Filing 2011 tax return in 2013 Income from teaching or lecturing is considered the same as income from their work as practitioners. Filing 2011 tax return in 2013 Readers. Filing 2011 tax return in 2013   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. Filing 2011 tax return in 2013 Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. Filing 2011 tax return in 2013 Some exceptions are discussed next. Filing 2011 tax return in 2013 Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. Filing 2011 tax return in 2013 If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. Filing 2011 tax return in 2013 Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. Filing 2011 tax return in 2013 28 during the tax year. Filing 2011 tax return in 2013 However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. Filing 2011 tax return in 2013 Churches and church organizations make this election by filing two copies of Form 8274. Filing 2011 tax return in 2013 For more information about making this election, see Form 8274. Filing 2011 tax return in 2013 Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. Filing 2011 tax return in 2013 This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. Filing 2011 tax return in 2013 Make this choice by filing Form 4029. Filing 2011 tax return in 2013 See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. Filing 2011 tax return in 2013 U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. Filing 2011 tax return in 2013 Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 social security system. Filing 2011 tax return in 2013 To determine your alien status, see Publication 519, U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Tax Guide for Aliens. Filing 2011 tax return in 2013 Residents of Puerto Rico, the U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Virgin Islands, Guam, the CNMI, and American Samoa. Filing 2011 tax return in 2013   If you are a resident of one of these U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 possessions but not a U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. Filing 2011 tax return in 2013 For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. Filing 2011 tax return in 2013 Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. Filing 2011 tax return in 2013 Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. Filing 2011 tax return in 2013 Even if you have an exemption, only the income you receive for performing ministerial services is exempt. Filing 2011 tax return in 2013 The exemption does not apply to any other income. Filing 2011 tax return in 2013 The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. Filing 2011 tax return in 2013 Ministers Most services you perform as a minister, priest, rabbi, etc. Filing 2011 tax return in 2013 , are ministerial services. Filing 2011 tax return in 2013 These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. Filing 2011 tax return in 2013 You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. Filing 2011 tax return in 2013 A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. Filing 2011 tax return in 2013 Services for nonreligious organizations. Filing 2011 tax return in 2013   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. Filing 2011 tax return in 2013 Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. Filing 2011 tax return in 2013   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. Filing 2011 tax return in 2013 Services that are not part of your ministry. Filing 2011 tax return in 2013   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. Filing 2011 tax return in 2013 The following are not ministerial services. Filing 2011 tax return in 2013 Services you perform for nonreligious organizations other than the services stated above. Filing 2011 tax return in 2013 Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. Filing 2011 tax return in 2013 These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. Filing 2011 tax return in 2013 (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. Filing 2011 tax return in 2013 ) Services you perform in a government-owned and operated hospital. Filing 2011 tax return in 2013 (These services are considered performed by a government employee, not by a minister as part of the ministry. Filing 2011 tax return in 2013 ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. Filing 2011 tax return in 2013 Books or articles. Filing 2011 tax return in 2013   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. Filing 2011 tax return in 2013   This rule also applies to members of religious orders and to Christian Science practitioners and readers. Filing 2011 tax return in 2013 Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. Filing 2011 tax return in 2013 The services are considered ministerial because you perform them as an agent of the order. Filing 2011 tax return in 2013 For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. Filing 2011 tax return in 2013 However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. Filing 2011 tax return in 2013 Effect of employee status. Filing 2011 tax return in 2013   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. Filing 2011 tax return in 2013 In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. Filing 2011 tax return in 2013 This result is true even if you have taken a vow of poverty. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. Filing 2011 tax return in 2013 They renounce all claims to their earnings. Filing 2011 tax return in 2013 The earnings belong to the order. Filing 2011 tax return in 2013 Pat is a licensed attorney. Filing 2011 tax return in 2013 The superiors of the order instructed her to get a job with a law firm. Filing 2011 tax return in 2013 Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. Filing 2011 tax return in 2013 Chris is a secretary. Filing 2011 tax return in 2013 The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. Filing 2011 tax return in 2013 Chris took the job and gave all his earnings to the order. Filing 2011 tax return in 2013 Pat's services are not duties required by the order. Filing 2011 tax return in 2013 Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. Filing 2011 tax return in 2013 Chris' services are duties required by the order. Filing 2011 tax return in 2013 He is acting as an agent of the order and not as an employee of a third party. Filing 2011 tax return in 2013 He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. Filing 2011 tax return in 2013 Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. Filing 2011 tax return in 2013 Amounts you receive for performing these services are generally subject to SE tax. Filing 2011 tax return in 2013 You may request an exemption from SE tax, discussed next, which applies only to those services. Filing 2011 tax return in 2013 Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. Filing 2011 tax return in 2013 Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. Filing 2011 tax return in 2013 They do not have to request the exemption. Filing 2011 tax return in 2013 Who cannot be exempt. Filing 2011 tax return in 2013   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. Filing 2011 tax return in 2013 These elections are irrevocable. Filing 2011 tax return in 2013 You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. Filing 2011 tax return in 2013 You elected before 1968 to be covered under social security for your ministerial services. Filing 2011 tax return in 2013 Requesting exemption. Filing 2011 tax return in 2013    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. Filing 2011 tax return in 2013 More detailed explanations follow. Filing 2011 tax return in 2013 If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. Filing 2011 tax return in 2013 It does not apply to any other self-employment income. Filing 2011 tax return in 2013 Table 2. Filing 2011 tax return in 2013 The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. Filing 2011 tax return in 2013 You file Form 4361, described below under Requesting Exemption—Form 4361 . Filing 2011 tax return in 2013 You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. Filing 2011 tax return in 2013 You file for other than economic reasons. Filing 2011 tax return in 2013 You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). Filing 2011 tax return in 2013 This requirement does not apply to Christian Science practitioners or readers. Filing 2011 tax return in 2013 You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. Filing 2011 tax return in 2013 You establish that the organization is a church or a convention or association of churches. Filing 2011 tax return in 2013 You did not make an election discussed earlier under Who cannot be exempt . Filing 2011 tax return in 2013 You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. Filing 2011 tax return in 2013 Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. Filing 2011 tax return in 2013 The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. Filing 2011 tax return in 2013 If it is approved, keep the approved copy of Form 4361 in your permanent records. Filing 2011 tax return in 2013 When to file. Filing 2011 tax return in 2013   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. Filing 2011 tax return in 2013 You have net earnings from self-employment of at least $400. Filing 2011 tax return in 2013 Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. Filing 2011 tax return in 2013 The 2 years do not have to be consecutive tax years. Filing 2011 tax return in 2013    The approval process can take some time, so you should file Form 4361 as soon as possible. Filing 2011 tax return in 2013 Example 1. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. Filing 2011 tax return in 2013 He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. Filing 2011 tax return in 2013 However, if Rev. Filing 2011 tax return in 2013 Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. Filing 2011 tax return in 2013 Example 2. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. Filing 2011 tax return in 2013 She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. Filing 2011 tax return in 2013 However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. Filing 2011 tax return in 2013 Example 3. Filing 2011 tax return in 2013 In 2011, Rev. Filing 2011 tax return in 2013 David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. Filing 2011 tax return in 2013 In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. Filing 2011 tax return in 2013 Therefore, he had no net self-employment earnings as a minister in 2012. Filing 2011 tax return in 2013 Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. Filing 2011 tax return in 2013 In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. Filing 2011 tax return in 2013 Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. Filing 2011 tax return in 2013 Death of individual. Filing 2011 tax return in 2013   The right to file an application for exemption ends with an individual's death. Filing 2011 tax return in 2013 A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. Filing 2011 tax return in 2013 Effective date of exemption. Filing 2011 tax return in 2013   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. Filing 2011 tax return in 2013 Once the exemption is approved, it is irrevocable. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. Filing 2011 tax return in 2013 She files an application for exemption on February 20, 2014. Filing 2011 tax return in 2013 If an exemption is granted, it is effective for 2010 and the following years. Filing 2011 tax return in 2013 Refunds of SE tax. Filing 2011 tax return in 2013   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. Filing 2011 tax return in 2013 Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. Filing 2011 tax return in 2013 A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. Filing 2011 tax return in 2013   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. Filing 2011 tax return in 2013 Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. Filing 2011 tax return in 2013 Exception. Filing 2011 tax return in 2013   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. Filing 2011 tax return in 2013 However, if you pay your benefits back, you may be considered for exemption. Filing 2011 tax return in 2013 Contact your local Social Security Administration office to find out the amount you must pay back. Filing 2011 tax return in 2013 Eligibility requirements. Filing 2011 tax return in 2013   To claim this exemption from SE tax, all the following requirements must be met. Filing 2011 tax return in 2013 You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . Filing 2011 tax return in 2013 As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. Filing 2011 tax return in 2013 You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. Filing 2011 tax return in 2013 The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. Filing 2011 tax return in 2013 Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. Filing 2011 tax return in 2013 The sect or division must complete part of the form. Filing 2011 tax return in 2013 The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. Filing 2011 tax return in 2013 If it is approved, keep the approved copy of Form 4029 in your permanent records. Filing 2011 tax return in 2013 When to file. Filing 2011 tax return in 2013   You can file Form 4029 at any time. Filing 2011 tax return in 2013   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. Filing 2011 tax return in 2013 See Effective date of exemption next for information on when the newly approved exemption would become effective. Filing 2011 tax return in 2013    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. Filing 2011 tax return in 2013 Effective date of exemption. Filing 2011 tax return in 2013   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. Filing 2011 tax return in 2013 (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. Filing 2011 tax return in 2013 )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. Filing 2011 tax return in 2013 You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. Filing 2011 tax return in 2013 The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. Filing 2011 tax return in 2013 Refunds of SE tax paid. Filing 2011 tax return in 2013    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. Filing 2011 tax return in 2013 For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. Filing 2011 tax return in 2013 Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. Filing 2011 tax return in 2013 Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. Filing 2011 tax return in 2013 A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. Filing 2011 tax return in 2013 If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. Filing 2011 tax return in 2013 Information for employers. Filing 2011 tax return in 2013   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. Filing 2011 tax return in 2013   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. Filing 2011 tax return in 2013 Form W-2. Filing 2011 tax return in 2013   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. Filing 2011 tax return in 2013 ” Do not make any entries in boxes 3, 4, 5, or 6. Filing 2011 tax return in 2013 Forms 941, 943, and 944. Filing 2011 tax return in 2013   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. Filing 2011 tax return in 2013 Instead, follow the instructions given below. Filing 2011 tax return in 2013 Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. Filing 2011 tax return in 2013 Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. Filing 2011 tax return in 2013 Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. Filing 2011 tax return in 2013 Effective date. Filing 2011 tax return in 2013   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. Filing 2011 tax return in 2013 The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. Filing 2011 tax return in 2013 Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. Filing 2011 tax return in 2013 Regular method. Filing 2011 tax return in 2013 Nonfarm optional method. Filing 2011 tax return in 2013 You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. Filing 2011 tax return in 2013 Blank worksheets are in the back of this publication, after the Comprehensive Example. Filing 2011 tax return in 2013 Regular Method Most people use the regular method. Filing 2011 tax return in 2013 Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. Filing 2011 tax return in 2013 Then, subtract your allowable business deductions and multiply the difference by 92. Filing 2011 tax return in 2013 35% (. Filing 2011 tax return in 2013 9235). Filing 2011 tax return in 2013 Use Schedule SE (Form 1040) to figure your net earnings and SE tax. Filing 2011 tax return in 2013 If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. Filing 2011 tax return in 2013 35% (. Filing 2011 tax return in 2013 9235). Filing 2011 tax return in 2013 Do not reduce your wages by any business deductions when making this computation. Filing 2011 tax return in 2013 Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. Filing 2011 tax return in 2013 If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. Filing 2011 tax return in 2013 Amounts included in gross income. Filing 2011 tax return in 2013   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. Filing 2011 tax return in 2013 , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. Filing 2011 tax return in 2013 This amount is also subject to income tax. Filing 2011 tax return in 2013   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. Filing 2011 tax return in 2013 The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. Filing 2011 tax return in 2013 His church owns a parsonage that has a fair rental value of $12,000 per year. Filing 2011 tax return in 2013 The church gives Pastor Adams the use of the parsonage. Filing 2011 tax return in 2013 He is not exempt from SE tax. Filing 2011 tax return in 2013 He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. Filing 2011 tax return in 2013 The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. Filing 2011 tax return in 2013 Overseas duty. Filing 2011 tax return in 2013   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 citizen or resident alien serving abroad and living in a foreign country. Filing 2011 tax return in 2013   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 Diane Jones was the minister of a U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 church in Mexico. Filing 2011 tax return in 2013 She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. Filing 2011 tax return in 2013 The United States does not have a social security agreement with Mexico, so Mrs. Filing 2011 tax return in 2013 Jones is subject to U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 SE tax and must include $35,000 when figuring net earnings from self-employment. Filing 2011 tax return in 2013 Specified U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 possessions. Filing 2011 tax return in 2013    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. Filing 2011 tax return in 2013 Also see Residents of Puerto Rico, the U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Citizens and Resident and Nonresident Aliens. Filing 2011 tax return in 2013 Amounts not included in gross income. Filing 2011 tax return in 2013   Do not include the following amounts in gross income when figuring your net earnings from self-employment. Filing 2011 tax return in 2013 Offerings that others made to the church. Filing 2011 tax return in 2013 Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. Filing 2011 tax return in 2013 Pension payments or retirement allowances you receive for your past ministerial services. Filing 2011 tax return in 2013 The rental value of a parsonage or a parsonage allowance provided to you after you retire. Filing 2011 tax return in 2013 Allowable deductions. Filing 2011 tax return in 2013   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. Filing 2011 tax return in 2013 These are ministerial expenses you incurred while working other than as a common-law employee of the church. Filing 2011 tax return in 2013 They include expenses incurred in performing marriages and baptisms, and in delivering speeches. Filing 2011 tax return in 2013 Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. Filing 2011 tax return in 2013   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . Filing 2011 tax return in 2013 Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Filing 2011 tax return in 2013 Do not complete Schedule C or C-EZ (Form 1040). Filing 2011 tax return in 2013 However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. Filing 2011 tax return in 2013 Employee reimbursement arrangements. Filing 2011 tax return in 2013   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Filing 2011 tax return in 2013 Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. Filing 2011 tax return in 2013 Accountable plans. Filing 2011 tax return in 2013   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. Filing 2011 tax return in 2013 Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Filing 2011 tax return in 2013 You must adequately account to your employer for these expenses within a reasonable period of time. Filing 2011 tax return in 2013 You must return any excess reimbursement or allowance within a reasonable period of time. Filing 2011 tax return in 2013   The reimbursement is not reported on your Form W-2. Filing 2011 tax return in 2013 Generally, if your expenses equal your reimbursement, you have no deduction. Filing 2011 tax return in 2013 If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. Filing 2011 tax return in 2013 Nonaccountable plan. Filing 2011 tax return in 2013   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. Filing 2011 tax return in 2013 In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. Filing 2011 tax return in 2013 Excess reimbursements you fail to return to your employer. Filing 2011 tax return in 2013 Reimbursement of nondeductible expenses related to your employer's business. Filing 2011 tax return in 2013   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. Filing 2011 tax return in 2013 Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. Filing 2011 tax return in 2013   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Filing 2011 tax return in 2013 Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. Filing 2011 tax return in 2013 If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. Filing 2011 tax return in 2013 Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. Filing 2011 tax return in 2013 The tax rate for the social security part is 12. Filing 2011 tax return in 2013 4%. Filing 2011 tax return in 2013 In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. Filing 2011 tax return in 2013 This tax rate is 2. Filing 2011 tax return in 2013 9%. Filing 2011 tax return in 2013 The combined self-employment tax rate is 15. Filing 2011 tax return in 2013 3%. Filing 2011 tax return in 2013 Additional Medicare Tax. Filing 2011 tax return in 2013   Beginning in 2013, a 0. Filing 2011 tax return in 2013 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Filing 2011 tax return in 2013 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Filing 2011 tax return in 2013 A self-employment loss is not considered for purposes of this tax. Filing 2011 tax return in 2013 RRTA compensation is separately compared to the threshold. Filing 2011 tax return in 2013 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Filing 2011 tax return in 2013 Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. Filing 2011 tax return in 2013 In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. Filing 2011 tax return in 2013 You may use the nonfarm optional method if you meet all the following tests. Filing 2011 tax return in 2013 You are self-employed on a regular basis. Filing 2011 tax return in 2013 You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Filing 2011 tax return in 2013 The net earnings can be from either farm or nonfarm earnings or both. Filing 2011 tax return in 2013 You have used this method less than 5 prior years. Filing 2011 tax return in 2013 (There is a 5-year lifetime limit. Filing 2011 tax return in 2013 ) The years do not have to be consecutive. Filing 2011 tax return in 2013 Your net nonfarm profits were: Less than $5,024, and Less than 72. Filing 2011 tax return in 2013 189% of your gross nonfarm income. Filing 2011 tax return in 2013 If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. Filing 2011 tax return in 2013 Table 3. Filing 2011 tax return in 2013 Figuring Nonfarm Net Earnings IF your gross nonfarm income is . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 THEN your net earnings are equal to . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 $6,960 or less Two-thirds of your gross nonfarm income. Filing 2011 tax return in 2013 More than $6,960 $4,640. Filing 2011 tax return in 2013 Actual net earnings. Filing 2011 tax return in 2013   Multiply your total earnings subject to SE tax by 92. Filing 2011 tax return in 2013 35% (. Filing 2011 tax return in 2013 9235) to get actual net earnings. Filing 2011 tax return in 2013 Actual net earnings are equivalent to net earnings under the “Regular Method. Filing 2011 tax return in 2013 ” More information. Filing 2011 tax return in 2013   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. Filing 2011 tax return in 2013 Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. Filing 2011 tax return in 2013 Note. Filing 2011 tax return in 2013 For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. Filing 2011 tax return in 2013 Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. Filing 2011 tax return in 2013 Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Filing 2011 tax return in 2013 , in addition to your salary. Filing 2011 tax return in 2013 If the offering is made to the religious institution, it is not taxable to you. Filing 2011 tax return in 2013 Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. Filing 2011 tax return in 2013 However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Filing 2011 tax return in 2013 For more information, see Publication 526. Filing 2011 tax return in 2013 Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. Filing 2011 tax return in 2013 Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. Filing 2011 tax return in 2013 This exclusion applies only for income tax purposes. Filing 2011 tax return in 2013 It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. Filing 2011 tax return in 2013 Designation requirement. Filing 2011 tax return in 2013   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. Filing 2011 tax return in 2013 It must designate a definite amount. Filing 2011 tax return in 2013 It cannot determine the amount of the housing allowance at a later date. Filing 2011 tax return in 2013 If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. Filing 2011 tax return in 2013   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. Filing 2011 tax return in 2013 The local congregation must officially designate the part of your salary that is a housing allowance. Filing 2011 tax return in 2013 However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. Filing 2011 tax return in 2013 Rental allowances. Filing 2011 tax return in 2013   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. Filing 2011 tax return in 2013   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. Filing 2011 tax return in 2013 Fair rental value of parsonage. Filing 2011 tax return in 2013   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. Filing 2011 tax return in 2013 However, the exclusion cannot be more than the reasonable pay for your services. Filing 2011 tax return in 2013 If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Joanna Baker is a full-time minister. Filing 2011 tax return in 2013 The church allows her to use a parsonage that has an annual fair rental value of $24,000. Filing 2011 tax return in 2013 The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. Filing 2011 tax return in 2013 Her actual utility costs during the year were $7,000. Filing 2011 tax return in 2013 For income tax purposes, Rev. Filing 2011 tax return in 2013 Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). Filing 2011 tax return in 2013 She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). Filing 2011 tax return in 2013 Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). Filing 2011 tax return in 2013 Home ownership. Filing 2011 tax return in 2013   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. Filing 2011 tax return in 2013 Excess rental allowance. Filing 2011 tax return in 2013   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. Filing 2011 tax return in 2013   Include in the total on Form 1040, line 7. Filing 2011 tax return in 2013 On the dotted line next to line 7, enter “Excess allowance” and the amount. Filing 2011 tax return in 2013 You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. Filing 2011 tax return in 2013 However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). Filing 2011 tax return in 2013 Retired ministers. Filing 2011 tax return in 2013   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. Filing 2011 tax return in 2013 However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. Filing 2011 tax return in 2013 Teachers or administrators. Filing 2011 tax return in 2013   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. Filing 2011 tax return in 2013 However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. Filing 2011 tax return in 2013    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. Filing 2011 tax return in 2013 In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. Filing 2011 tax return in 2013   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. Filing 2011 tax return in 2013 Theological students. Filing 2011 tax return in 2013   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. Filing 2011 tax return in 2013 Traveling evangelists. Filing 2011 tax return in 2013   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. Filing 2011 tax return in 2013 You are an ordained minister. Filing 2011 tax return in 2013 You perform ministerial services at churches located away from your community. Filing 2011 tax return in 2013 You actually use the rental allowance to maintain your permanent home. Filing 2011 tax return in 2013 Cantors. Filing 2011 tax return in 2013   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. Filing 2011 tax return in 2013 Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. Filing 2011 tax return in 2013 See Members of Religious Orders , earlier, under Social Security Coverage. Filing 2011 tax return in 2013 Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 possession. Filing 2011 tax return in 2013 Publication 54 discusses the foreign earned income exclusion. Filing 2011 tax return in 2013 Publication 570, Tax Guide for Individuals With Income From U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Possessions, covers the rules for taxpayers with income from U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 possessions. Filing 2011 tax return in 2013 You can get these free publications from the Internal Revenue Service at IRS. Filing 2011 tax return in 2013 gov or from most U. Filing 2011 tax return in 2013 S. Filing 2011 tax return in 2013 Embassies or consulates. Filing 2011 tax return in 2013 Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. Filing 2011 tax return in 2013 Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. Filing 2011 tax return in 2013 You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). Filing 2011 tax return in 2013 You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. Filing 2011 tax return in 2013 See Publication 529 for more information on this limit. Filing 2011 tax return in 2013 However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). Filing 2011 tax return in 2013 Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. Filing 2011 tax return in 2013 You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. Filing 2011 tax return in 2013 Exception. Filing 2011 tax return in 2013   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. Filing 2011 tax return in 2013 Figuring the allocation. Filing 2011 tax return in 2013   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. Filing 2011 tax return in 2013    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. Filing 2011 tax return in 2013 Example. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. Filing 2011 tax return in 2013 He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. Filing 2011 tax return in 2013 $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. Filing 2011 tax return in 2013 Rev. Filing 2011 tax return in 2013 Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. Filing 2011 tax return in 2013 Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. Filing 2011 tax return in 2013   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. Filing 2011 tax return in 2013 The statement must contain all of the following information. Filing 2011 tax return in 2013 A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. Filing 2011 tax return in 2013 ) plus the amount. Filing 2011 tax return in 2013 A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. Filing 2011 tax return in 2013 A list of each item of otherwise deductible ministerial expenses plus the amount. Filing 2011 tax return in 2013 How you figured the nondeductible part of your otherwise deductible expenses. Filing 2011 tax return in 2013 A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. Filing 2011 tax return in 2013   See the attachments prepared for the Comprehensive Example , later. Filing 2011 tax return in 2013 Following the example, you will find blank worksheets for your own use. Filing 2011 tax return in 2013 Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. Filing 2011 tax return in 2013 If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. Filing 2011 tax return in 2013 See the Instructions for Form 1040 to figure your deduction. Filing 2011 tax return in 2013 The following special rules apply to the self-employed health insurance deduction. Filing 2011 tax return in 2013 You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. Filing 2011 tax return in 2013 You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. Filing 2011 tax return in 2013 The deduction cannot exceed your net earnings from the business under which the insurance plan is established. Filing 2011 tax return in 2013 Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. Filing 2011 tax return in 2013 More information. Filing 2011 tax return in 2013   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. Filing 2011 tax return in 2013 Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. Filing 2011 tax return in 2013 This is an income tax deduction only, on Form 1040, line 27. Filing 2011 tax return in 2013 Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. Filing 2011 tax return in 2013 Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. Filing 2011 tax return in 2013 You must pay the tax as you earn or receive income during the year. Filing 2011 tax return in 2013 An employee usually has income tax withheld from his or her wages or salary. Filing 2011 tax return in 2013 However, your salary is not subject to federal income tax withholding if both of the following conditions apply. Filing 2011 tax return in 2013 You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. Filing 2011 tax return in 2013 Your salary is for ministerial services (see Ministerial Services , earlier). Filing 2011 tax return in 2013 If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. Filing 2011 tax return in 2013 You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. Filing 2011 tax return in 2013 Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. Filing 2011 tax return in 2013 Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. Filing 2011 tax return in 2013 See Form 1040-ES for the different payment methods. Filing 2011 tax return in 2013 The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. Filing 2011 tax return in 2013 For more information, see chapter 2 of Publication 505. Filing 2011 tax return in 2013 If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. Filing 2011 tax return in 2013 Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. Filing 2011 tax return in 2013 Table 4. Filing 2011 tax return in 2013 2013 Filing Requirements for Most Taxpayers IF your filing status is . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 AND at the end of 2013 you were* . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 THEN file a return if your gross income** was at least . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 . Filing 2011 tax return in 2013 single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Filing 2011 tax return in 2013 ** Gross income means all income you received in the form of money, goods, property, and services that is not 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). Filing 2011 tax return in 2013 Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, 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). Filing 2011 tax return in 2013 If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. Filing 2011 tax return in 2013 Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). Filing 2011 tax return in 2013 Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Filing 2011 tax return in 2013 But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Filing 2011 tax return in 2013 *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. Filing 2011 tax return in 2013 Additional requirements. Filing 2011 tax return in 2013   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. Filing 2011 tax return in 2013 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). Filing 2011 tax return in 2013 Self-employment tax. Filing 2011 tax return in 2013   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. Filing 2011 tax return in 2013   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. Filing 2011 tax return in 2013 You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). Filing 2011 tax return in 2013 You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. Filing 2011 tax return in 2013 However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). Filing 2011 tax return in 2013 Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Filing 2011 tax return in 2013 Note. Filing 2011 tax return in 2013 For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. Filing 2011 tax return in 2013 You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. Filing 2011 tax return in 2013 Exemption from SE tax. Filing 2011 tax return in 2013   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Filing 2011 tax return in 2013 Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. Filing 2011 tax return in 2013 However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. Filing 2011 tax return in 2013    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Filing 2011 tax return in 2013 Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. Filing 2011 tax return in 2013 More information. Filing 2011 tax return in 2013   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. Filing 2011 tax return in 2013 Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. Filing 2011 tax return in 2013 You generally can deduct your contributions to the plan. Filing 2011 tax return in 2013 Your contributions and the earnings on them are not taxed until they are distributed. Filing 2011 tax return in 2013 Retirement plans for the self-employed. Filing 2011 tax return in 2013   To set up one of the following plans you must be self-employed. Filing 2011 tax return in 2013 SEP (simplified employee pension) plan. Filing 2011 tax return in 2013 SIMPLE (savings incentive match plan for employees) plan. Filing 2011 tax return in 2013 Qualified retirement plan (also called a Keogh or H. Filing 2011 tax return in 2013 R. Filing 2011 tax return in 2013 10 plan). Filing 2011 tax return in 2013   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. Filing 2011 tax return in 2013 See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. Filing 2011 tax return in 2013 This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. Filing 2011 tax return in 2013   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. Filing 2011 tax return in 2013 You are not a self-employed person for purposes of setting up a retirement plan. Filing 2011 tax return in 2013 This result is true even if your salary is subject to SE tax. Filing 2011 tax return in 2013   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. Filing 2011 tax return in 2013   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Filing 2011 tax return in 2013 Individual retirement arrangements (IRAs). Filing 2011 tax return in 2013   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. Filing 2011 tax return in 2013 Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). Filing 2011 tax return in 2013   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. Filing 2011 tax return in 2013 You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. Filing 2011 tax return in 2013   If you contribute to a traditional IRA, your contribution may be deductible. Filing 2011 tax return in 2013 However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). Filing 2011 tax return in 2013   For more information on IRAs, see Publication 590. Filing 2011 tax return in 2013 Tax-sheltered annuity plans. Filing 2011 tax return in 2013   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. Filing 2011 tax return in 2013 For more