Whenever I work with a minister that has filed Form 4361, I always tell them it is their most valuable asset. An approved Form 4361 is very difficult to replace. Without the approved form it is hard to convince an IRS agent that the minister is exempt from Self Employment tax. The courts have allowed the exemption without an approved form where the minister has retained proof that he filed the form. Apparently, a Form 4361 that is properly completed and timely filed is rarely not approved by the IRS.
Every year I come in contact with ministers who do not have copies of their approved Forms 4361. To make matters worse, they also do not have any evidence of filing the form with the IRS. In the past, I have had little guidance to give to them regarding how to obtain a duplicate of the approved form. However, the IRS recently published a Minister Audit Technique Guide reviewing all the rules regarding ministers for its agents. One of the sections explains to the IRS agent what to do if the minister cannot provide his/her Form 4361.
The IRS gives its agents three avenues for confirming the exemption:
- For ministers who filed the Form 4361 after 1988, the agent can order a transcript for the year under audit. Included on this transcript should be an indicator that tells the agent the minister is exempt from Self Employment tax.
- If the transcript is not an option, the agent can contact the Taxpayer Relations Branch at the IRS Service Center where the Form 4361 was filed and request a copy of the form.
- The last option is to contact the Social Security Administration in Baltimore and ask them to provide confirmation of a minister's exempt status.