Dave Ramsey, Please Take Down this Article

Bad Advice on Clergy Self-Employment Tax Exemption Can Really Hurt

Dave Ramsey has helped a lot of people for a long time and deserves kudos for putting so many on the path to financial freedom. But in the volume of advice given, there’s bound to be a few times when the advice falls flat. This is one of those times.

Ramsey published an article September 1, 2023, which opens by saying that they talk to a lot of pastors at Ramsey Solutions, and one question always seems to pop up: “Can I opt out of Social Security?” Although the next paragraph counsels the reader to consult with a tax professional, nothing that follows tells pastors what they need to know. Left to themselves, pastors would conclude that they could opt out solely because they’re in ministry. Here’s a quote from the article: “Here’s the long and short of it: You can legally opt out of Social Security on religious grounds—but you need legit reasons—like being in ministry.” Sadly, this is misleading. Yes, you need to be in ministry, but there’s more to it than that. As a CPA with over 30 years of experience with clergy taxes, I am accustomed to unraveling bad advice like this.

While you do need to be in ministry to opt out, you also need to be conscientiously opposed to accepting public insurance. It’s not about paying the tax, it’s about receiving the benefit. This is an important distinction that eludes many. Here’s a link to Form 4361 - read the statement in Section 7 carefully. The statement that you must attest to under penalty of perjury is quite clear and doesn’t leave room for the economic arguments Ramsey proposes.

Further down, the author asserts: “If we were in your shoes and serving as a church pastor, we’d opt out in a nanosecond. That’s because sending money to the Social Security office is a bad way to manage your money for God.” As Form 4361 and the underlying Internal Revenue Code Section 1402(e) make plain, the economic reason Ramsey stated is not valid.

Perhaps you’re also opposed to paying social security tax. I’m with you there. You think the government squanders our tax dollars? I do as well, along with most everybody else, but that’s not the issue.

If you’re a pastor you’ve probably had spiritual discussions with people who couldn’t exegete their way out of a wet paper bag. I feel exactly the same way about novices who try to handle the tax law. I hope you lovingly shepherd your novices to a mature understanding. For my part, I’m trying.

Pastor, when it comes to opting out of Social Security there are many factors to consider, which I will cover in future installments. And if you want to take a stand against wasteful government policies, please find another way to do it - this is not your hill to die on. Flee to a competent tax advisor. If you don’t have one, give me a call; I would love to help you.

I don’t expect Ramsey Solutions articles to be written at a technical level, and I expect them to be light on details and heavy on snark, consistent with Dave’s style, but I don’t expect them to be misleading either. Dave, please take that article down before it does real harm.