Do the Amish Pay Taxes?
In Central Pennsylvania, we are accustomed to seeing our Amish neighbors around the community, but one point on which many are unsure is whether Amish community members are held to the same tax responsibilities as everyone else.
In general, the Amish pay most of the same taxes as everyone else. They are responsible for reporting and paying income tax, sales tax, and real property tax. The one exception is the same exception given to ministers, clergy members, and Christian Science practitioners. The Amish can be exempt from paying FICA, FUTA, and Self-Employment tax.
What do those taxes include? FICA stands for Federal Insurance Contributions Act, which funds Social Security and Medicare. FUTA stands for the Federal Unemployment Tax Act, which funds unemployment benefits. Anyone who has been an employee is used to seeing those line items on their pay checks. Employers withhold those amounts from employee wages, and pay an employer portion, to fund the employee’s insured status for those benefits if the employee should meet other qualifications. People who are self-employed pay FICA taxes through their self-employment taxes, found on Schedule SE with their form 1040, to have insured status for Social Security and Medicare.
Exemption from FICA and FUTA taxes is based on strongly held religious beliefs that require the individual to refuse receipt of the insurance programs into which those taxes pay. The individual may receive exemption from paying into Social Security, Medicare, and Unemployment Compensation because the individual will never receive those benefits, even in old age.
The exemption is not automatic. You are not exempt from self-employment tax merely by being a member of a particular religion or profession. There is an application process. The IRS requires you to file a form requesting the exemption, and that form includes a lengthy certification regarding your religious beliefs and their requirement that you not accept various types of public insurance. You also must never have actually received any type of public insurance benefits, such as Social Security, or had anyone else receive those benefits based on your earnings record. After the application is submitted, the exemption must be approved by the Internal Revenue Service, who may determine you do not qualify and disapprove your application.
Once obtained, the exemption does not universally apply to all earnings. It only applies to earnings after the IRS approved the exemptions. Even then, it only applies to the extent that the exempt person is self-employed, engaged in a partnership exclusively with others who also have the exemption, or is employed by someone who also has the exemption. If an Amish person becomes an employee of an employer who does not have the exemption, the employer must withhold and remit FICA and FUTA taxes for the Amish employee the same as for all other employees.
If you believe you should qualify for tax exemption, are unsure of your obligations in regard to an employee who may be exempt, or have other legal questions you want answered, call our office 717 657 7770 to schedule a free consultation with a Scaringi Law attorney.