What Is the 4029 Exemption and Who Qualifies?

The 4029 exemption provides a method for members of certain religious groups to obtain a waiver from paying Social Security and Medicare taxes. This exemption is not widely available and is restricted to individuals whose religious beliefs conscientiously object to accepting public or private insurance benefits, which includes Social Security. Obtaining this exemption is a significant financial decision, as it involves waiving all Social Security and Medicare benefits. The waiver is irrevocable for the period the exemption is in effect.

Eligibility Requirements for the Exemption

To qualify for an exemption from Social Security and Medicare taxes, an individual must meet criteria established by the Internal Revenue Service (IRS). The primary requirement is that the person must be a member of a recognized religious sect or a division of that sect. This cannot be a newly formed group; the sect must have been in continuous existence since December 31, 1950.

The core tenet of the religious group must be a conscientious opposition to accepting benefits from any private or public insurance plan that provides payments for death, disability, retirement, or medical care. The sect must demonstrate that it makes reasonable provisions for its own dependent members, providing food, shelter, and medical care as needed.

An individual seeking the exemption must personally adhere to these beliefs and practices and waive all rights to any benefits or payments under the Social Security Act. An individual is not eligible for this exemption if they have ever received Social Security benefits, or if anyone else has received benefits based on their earnings. However, an application can be considered for approval if the applicant has paid back any benefits they received.

Completing Form 4029 Application for Exemption

The official document for this process is Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. It is not just a personal declaration; it requires certification of one’s faith.

A significant portion of Form 4029 requires the applicant to certify their membership in a specific, named religious group. The applicant must state that they are a member of and adhere to the teachings of that group. This section must be signed by an authorized representative of the religious sect, who confirms the applicant’s membership and the sect’s qualifying tenets.

The most binding part of the form is the waiver of benefits. By signing, the applicant formally requests an exemption from paying the employee’s share of Social Security and Medicare taxes and self-employment taxes. This signature confirms their conscientious objection and legally solidifies their decision to forgo all related government benefits. The form makes it clear that this action is irrevocable for the period the exemption is in effect.

Filing the Application and Employer Obligations

Once Form 4029 is fully completed and signed by both the applicant and the religious group’s representative, it must be filed in triplicate. The applicant sends all three copies of the form to the Social Security Administration (SSA). The SSA first reviews the application to determine if the religious sect meets the established requirements for the exemption. After its review, the IRS will make the final decision.

If the application is approved, the IRS will stamp one copy of the Form 4029 as “Approved” and return it to the applicant. The applicant is responsible for providing this approved form to their employer. An exemption is not considered granted until this approved copy is received.

Upon receiving the approved Form 4029, the employer’s obligations change immediately. The employer must stop withholding the employee’s share of Social Security and Medicare taxes from their wages. The employer is also exempt from paying their own matching share of these taxes for that specific employee. The employer is required to keep a copy of the approved Form 4029 on file as part of their employment tax records.

Maintaining or Losing the Exemption

The exemption is conditional upon the individual remaining a member of the qualifying religious group and is no longer valid if they leave the sect. The responsibility for Social Security and Medicare taxes is reinstated.

The timing for when tax liability resumes depends on the individual’s employment status. For self-employed individuals, the exemption ceases to be effective for the entire taxable year in which they leave the religious sect. They will be liable for self-employment taxes on all their self-employment income for that year.

For individuals who are employees, the rules are slightly different. The exemption from FICA taxes ends with respect to wages paid beginning with the calendar quarter after the quarter in which the individual leaves the sect.