TN 15 (06-97)

A. BACKGROUND

The Deficit Reduction Act of 1984 provides that certain churches may elect irrevocably to have the services of their employees excluded from Social Security coverage. See RS 01901.660.

B. POLICY

All present and future employees of churches which elect this exclusion are liable for self- employment taxes for services performed on or after January 1, 1984.

Their treatment as self-employed individuals differs in two respects:

• Earnings of $100 or more are subject to SECA taxes; and

• They are prohibited from deducting business expenses.

NOTE: They do qualify for exemption from SE taxes as members of certain religious groups beginning with remuneration paid after 12/31/89.