For some clergy, their prayers have been answered
A new bill working through the US House of Representatives may make planning for retirement easier for pastors. | by Don Corder with The Evangelical Council for Financial Accountability
As the President of a faith-based 501(c)3 charged with managing the finances of churches all around the United States, I stay abreast of developments that can have a huge impact on my church partners. One way that I do this is by being a member of the Evangelical Council for Financial Accountability (ECFA) and maintaining certification with them.
I recently saw that there is legislation in the US House of Representatives that would address a huge point of contention for a number of pastors who draw a housing allowance. Under current IRS rules, in order to receive a housing allowance, a pastor must opt-out of Social Security and in return, their housing allowance is tax-free.
This, however, can lead to some issues for clergy who may have made career changes and are no longer eligible for Social Security. For example, one of our ministry partners is led by a former pastor who felt the call on his life to minister to the homeless and left his church after years of drawing a housing allowance. Under this proposed legislation, clergy members may opt back into Social Security.
Below is an article from my friends at the ECFA which can shed more light on this subject:
Congressman Kevin McCarthy recently held a press conference with local pastors about his newly introduced bill, the Clergy Act. This bill would offer ministers – many of whom opted out of paying into Social Security in their youth – a two-year “open season” to effectively opt-in to Social Security. McCarthy released the following statement:
"In speaking with pastors throughout our community and faith leaders across the country, it became clear to me that clergy members need more choice and adaptability when it comes to planning for their retirement, including the ability to opt back into Social Security."
The Clergy Act would allow ministers who have previously opted out of self-employment social security to opt back in. Dan Busby, ECFA’s president, said “This opt-in provision is long past due and on behalf of ECFA’s over 2,400 members, we salute Representative McCarthy for introducing this legislation.”
An application must be filed by a minister no later than the due date of the Federal income tax return (including any extension thereof) for the minister’s second taxable year beginning after December 31, 2020. This proposed legislation does not require the payment of retroactive social security taxes for years before the opt-in is effective.
If you are currently in need of some help with your ministry's finances, reach out to my organization, The Provisum Group. We can work with you to help you make sense of the ever-changing tax laws and accounting regulations that can help keep you in compliance with your state and governing body.
