The Social Security Administration estimates that about 159 million people in the United States pay Social Security taxes. This represents most workers in the country, but some people are exempt from paying these taxes. The Social Security Act of 1935 exempted certain groups, partly out of a concern over the legality of imposing a federal tax on them. As a result, these people are also not eligible to receive Social Security benefits.
The authors of the original Social Security Act doubted the legality of the federal government imposing a tax on state governments, so the original act exempted employees of federal, state and local governments from paying into Social Security, or from collecting Social Security benefits. Instead, these entities were to establish their own retirement plans. Public employees paid into these benefit plans instead of paying Social Security taxes. In 1951, Congress passed a law that allowed states to opt in to Social Security if public employees in the state voted to do so. This provision of Social Security Law is called a Section 218 Agreement. This agreement covers public employees such as teachers, fire and police employees, workers in state prisons and other employees who work for the state or a local government. In states where workers voted not to opt into a Section 218 Agreement, public employees are exempt from Social Security taxes.
Members of certain religious groups also don’t pay Social Security taxes. Not every religious group qualifies for this exemption. In order to qualify, the group must be a recognized religious sect; the members must waive their right to all Social Security benefits, including disability or death benefits; must be conscientiously opposed to receiving such benefits; and must never have received or been entitled to such benefits. In addition, the religious group must have other provisions for providing for the members in retirement, and must have continuously done so since Dec. 31, 1950. If the group meets all these stipulations, then the member may file a Form 4029, Exemption From Social Security and Medicare Taxes and Waiver of Benefits. The Social Security administration will determine if the member’s claim for exemption is valid. For instance, the Amish are exempt from paying Social Security taxes. Ministers of religious groups may request an exemption from Social Security, but not if they have revoked a previous exemption. The exemption only applies to wages earned for their services as a minister. Clergy of religious orders that take a vow of poverty, such as nuns and monks, are automatically exempt from paying Social Security taxes.
Employees of foreign governments in the United States are exempt from Social Security taxes, as long as the work they perform is for the foreign government. These employees hold A visas. Crew members of foreign vessels operating in United States waters, who hold D visas, also do not have to pay Social Security taxes. Students, teachers, researchers and others who are in the United States on a temporary basis, and hold J, F, M or Q visas, are exempt from Social Security and Medicare taxes as long as the work they perform is for the purpose for which they were admitted to the United States. A student’s work for the college would be exempt from Social Security taxes, but if the student took a job at a restaurant, Social Security taxes would be deducted from the student’s paycheck. Holders of G visas, who are employees of international organizations, are exempt from Social Security taxes on work done in their official capacity with the organization.
Children under 18 who work for their parents in a family owned business do not have to pay Social Security taxes on their earnings. The business must be solely owned, or a partnership in which the partners are the child’s parents. If the family business is a corporation or a partnership between one parent and someone else, the child must pay Social Security taxes on wages earned. Children under 21 who perform domestic work, such as housekeeping, yard work and babysitting, do not have to pay Social Security taxes on those earnings.
- IRS: Aliens Employed in the U.S. – Social Security Taxes
- Social Security Online: Religious Groups Exempt From Social Security
- OLR Research Report: Teachers and Social Security
- Social Security Online: State and Local Government Employees
- Internal Revenue Service: Quick Reference Guide for Public Employers
- Social Security: Understanding the Benefits
- Amish Country News: Valentine Byler vs. the IRS, Pay Unto Caesar - The Amish & Social Security
- IRS: Publication 517 (2011) Social Security and Other Information for Members of the Clergy and Religious Workers
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