26 CFR 601.401: Employment taxes.

(Also Part I, Sections 1402, 3121; 1.1402 (e) (1)-1, 31.3121(b) (8)-1, 31.3121(k)-1.)

Rev. Proc. 67-43

Procedure for validating social security coverage for certain employees of churches, church denominations, church affiliated organizations, or missionary organizations, who have erroneously reported their wages as self-employment income.

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to set forth the procedure for validating social security coverage for any employee of a church, church denomination, church affiliated organization, or missionary organization, who

-desires social security coverage,

-erroneously filed Form 2031 (Waiver Certificate to Elect Social Security Coverage, for Use by Ministers, Certain Members of Religious Orders, and Christian Science Practitioners) on the assumption that he was qualified to file the Form 2031, -erroneously reported and paid self-employment tax, and -is not covered under a Form SS-15 (Certificate Waiving Exemption from Taxes under the Federal Insurance Contributions Act) filed by the church, denomination, or organization. The procedure stated herein will permit validation of these incorrect reportings and will assure coverage for future periods for the em ployees concerned.

SEC. 2. BACKGROUND.

.01 Under section 3121 (b) (8) (A) of the Federal Insurance Cor tributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954 services performed by a duly ordained, commissioned, or licensed min ister of a church in the exercise of his ministry or by a member of religious order in the exercise of duties required by such order ar excepted from employment. Pursuant to section 1402 (e) (1) of the Self-Employment Contributions Act (chapter 2, subtitle A, of th Code), individuals performing such excepted services may file a For 2031 and elect coverage under the social security program as se employed persons.

.02 Under Revenue Ruling 65-124, C.B. 1965-1, 60, when a chur: or church denomination ordains some ministers of the gospel a licenses or commissions others, the licensing or commissioning of individual will not qualify him as a minister for social security cover age purposes unless it invests him in every respect with a status wh is equivalent to ordination and is so recognized by the church. If individual does not come within the guidelines in Revenue Ruli 65-124, he does not qualify as a duly ordained, commissioned, or .censed minister within the meaning of section 3121(b) (8) (A) or ser tion 1402(e) (1) of the Code. He is not qualified to elect social secur“. coverage as a self-employed person by filing a Form 2031.

.03 A church or other organization which is exempt from incoɛ. tax under section 501 (a) of the Code as an organization described section 501 (c) (3) of the Code, and the individuals in its employ, r exempt from the taxes imposed under the Federal Insurance Contr

butions Act. Pursuant to sections 3121 (b) (8) (B) and 3121(k) of that Act, however, the employer may waive the exemption by filing a Form SS-15, certifying that it desires to have the Federal insurance system established by the Social Security Act extended to services performed by its employees. The Form SS-15 is effective for the date designated therein. A Form SS-15 currently filed may be made retroactive beginning with any calendar quarter not earlier than the twentieth calendar quarter before the quarter in which the Form SS-15 is filed. (See Section 3121 (k) (1) (B) (iii) of the Code.)

04 If the church or other organization files a Form SS-15, any ndividual in the employ of the church or organization (other than a luly ordained, commissioned, or licensed minister of a church performing services in the exercise of his ministry or a member of a religious order performing services in the exercise of duties required by uch order) on or before the last day of the calendar quarter in which he Form SS-15 is filed will be covered for social security purposes under the Federal Insurance Contributions Act if he signs the Form SS-15a (List to Accompany Certificate on Form SS-15 Waiving Exemption from Taxes under the Federal Insurance Contributions Act) or the Form SS-15a Supplement (Amendment to List on Form SS-15a). An employee who does not sign the Form SS-15a or Form SS-15a Supplement but who leaves the employ of the organization and s rehired on or after the first day following the close of the calendar quarter in which the Form SS-15 is filed will be automatically covered by the Form SS-15. Similarly, an individual who becomes an employee on or after the first day following the close of the calendar quarter in which the Form SS-15 is filed will be automatically covered. For urther discussion of the effective date of the waiver certificate and the overage of employees under the Form SS-15, see sections 3 and 4 of Revenue Procedure 67-35, page 662, this Bulletin.

.05 If an employee is covered under a Form SS-15 for any of the easons stated in paragraph .04 above, his wages are subject to the axes imposed under the Federal Insurance Contributions Act unless he remuneration he earns for the services in any calendar quarter is ess than $50.

EC. 3. INDIVIDUALS WHO ARE NOT PRESENTLY COVERED BY FORM SS-15.

.01 An employee is not presently covered if employed by a church r other organization which is exempt from income tax under section 01(a) of the Code as an organization described in section 501 (c) (3) f the Code and which has not filed a Form SS-15.

.02 An employee of a church or organization which has filed a Form S-15 is not presently covered if he did not sign the Form SS-15a or orm SS-15a Supplement and it is now too late to do so, or if he did ot enter or reenter the employ of the church or other organization on r after the first day following the close of the calendar quarter in hich the Form SS-15 was filed.

.03 The individual referred to in paragraph .01 or .02 of this secon may, however, have erroneously filed a Form 2031 electing coverge as a self-employed minister, and thereafter reported his wages as elf-employment income and paid the tax thereon.

SEC. 4. RECOGNITION OF INTEREST TO BE COVERED.

.01 The signing and filing of a Form 2031 and the reporting of self-employment income and payment of tax thereon, as described in section 1 above, are recognized as a strong expression that social security coverage is desired by the employee concerned. Therefore, if the church or organization has filed a Form SS-15 but the employee who erroneously filed the Form 2031 is not covered thereby, the employee and the employer may sign statements to the effect that the employee's signature on Form 2031, filed by him in the past, is considered equivalent to his signing of the Form SS-15a which was filed with the Form SS-15. In this circumstance, the employer and the employee have agreed, in effect, that the taxes under the Federal Insurance Contributions Act apply as of the first date for which the Form SS-15 was effective. If the employer and employee wish to enter into such agreement and pay taxes accordingly, they should so notify the District Director by furnishing the information described in sections 5.02 and 5.03.

.02 If the employee who filed the Form 2031 erroneously is not corered under a Form SS-15 because the employer has not previously waived its exemption but now wishes to file a Form SS-15, the District Director should be so notified and the information set forth in sections 5.02 and 5.03 should be furnished.

SEC. 5. SUBMISSION OF INFORMATION.

.01 The employer (church or other organization) should present its problem to the Internal Revenue office with which it files its returns and ask for a determination. The request should be accompanied by two separate statements, one from the church or other organization. and one from each employee concerned.

.02 The statement from the employer should be dated, signed by an officer of the church or other organization, and should contain the following information:

(1) The name, address, and employer identification number of the employer.

(2) A statement as to whether (a) the employer has established exemption for Federal income tax purposes as an organization described in section 501 (c) (3) of the Code, and whether (b) it has filed a Form SS-15. If a Form SS-15 has been filed, the statement should give the date of filing and the first calendar quarte: for which it was effective.

(3) The date the employer employed the individual and the continuity of employment. If the employment has not been continuous, a full explanation should be made.

(4) A statement that the employee does not qualify as a minister for social security tax purposes under Revenue Ruling 65-124.

(5) If the employer filed a Form SS-15, and the individual was an employee in the calendar quarter in which the Form SS-15 wr filed, a statement that the individual did not concur in the filing by signing a timely-filed Form SS-15a or a Form SS-15a Supple

ment.

(6) If the individual was employed in the calendar quarter i which the Form SS-15 was filed, but did not concur by signing

the Form SS-15a or Form SS-15a Supplement, a statement as to whether the employer considers the individual's signature on the Form 2031, filed in the past, equivalent to his signature on a timely-filed Form SS-15a or Form SS-15a Supplement.

(7) If the employer has not previously filed a Form SS-15, a statement that such form is attached and concurrently filed, together with a Form SS-15a signed by the employee.

.03 The statement from the employee should be dated, signed by him, and should contain the following information:

(1) His name, address, and social security number.

(2) The date he filed the Form 2031 and the Internal Revenue office with which he filed it.

(3) The Internal Revenue office where he filed his income tax returns and paid the self-employment tax.

(4) The year or years for which he paid the self-employment

tax.

(5) A statement as to whether (a) he ever filed a claim for refund of the self-employment tax, and, if so, whether (b) he obtained a refund, the date of the refund, and the years involved.

(6) The name and address of the church or other organization by which he was employed when he filed his returns and paid the self-employment tax.

(7) The name and address of the church or other organization by which he is now employed.

(8) The date he became an employee of the church or other organization.

(9) The fact that he does not qualify as a minister for social security tax purposes under Revenue Ruling 65–124.

(10) A statement that he desires that the earnings he reported as self-employment income remain credited to his social security

account.

(11) If the employer filed a Form SS-15 but the individual did not sign the related Form SS-15a or Form SS-15a Supplement, a statement as to whether he considers his signature on Form 2031, filed in the past, equivalent to his signing the Form SS-15a or Form SS-15a Supplement filed with the Form SS-15a.

SEC. 6. PROCEDURE WHEN EMPLOYER HAS NOT FILED FORM SS-15 AND DOES NOT WISH TO DO So.

The above procedure does not cover an individual who erroneously iled a Form 2031 and paid self-employment tax but who is an employee of a church or other organization which has not waived and does not lan to waive its exemption. Such individual should contact the Disrict Director for the purpose of obtaining a refund of the erroneously aid self-employment tax to the extent not barred by the period of imitation.

SEC. 7. PROCEDURE WHEN EMPLOYEE IS COVERED UNDER FORM SS-15. If the individual is covered under a Form SS-15 but has erroneously led a Form 2031 and paid tax under the Self-Employment Contribuions Act on his self-employment income when he should have paid ax under the Federal Insurance Contributions Act on his wages, the District Director should be consulted about the problem.