In the case of Hermann Kuma v. Greater New York Conference of Seventh-Day Adventist Church et al.[1] a former pastor was suing a church for failing to classify him as an employee and withhold FICA and Medicare taxes on the wages he was paid over a 21 year period.

Mr. Kuma was told when he attempted to apply for Social Security benefits that he did not have enough quarters of coverage on his account to qualify for benefits or to be eligible for Medicare. Mr. Kuma claimed that the church had treated him improperly as an independent contractor, causing him to face the loss of benefits under Social Security and Medicare and was looking to be awarded damages in compensation.

But Mr. Kuma faced a problem. Even if he was correct that the church had improperly treated him as an independent contractor, something the court did not specifically rule on, that would not have created his problem.

While generally employers are required to withhold and pay FICA taxes on wages paid to employees (see IRC §3111(a)), IRC §3121(b)(8)(A) specifically excludes from FICA withholding or the payment of employer FICA the “service performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order,…”

Rather, such ministers are subject to self-employment tax under IRC §1402(a)(8), unless they have been granted an exemption from the tax (for instance, pursuant to IRC §1402(e)(1)). Note that an exemption under §1402(e)(1) would have also resulted in Mr. Kuma being ineligible for the benefits as he would also lack sufficient quarters of coverage.

Thus, Mr. Kuma as either an employee minister or an independent contractor should have reported his income as self-employment income under IRC §1402(a), paying the self-employment tax that would have qualified him for the benefits he now finds he is unable to obtain. The church had acted properly in not withholding and paying FICA taxes on Mr. Kuma’s earnings for those 21 years.

[1] Hermann Kuma v. Greater New York Conference of Seventh-Day Adventist Church et al., USDC SD NY, Case No. 1:19-cv-0848