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taxmap/pub17/p17-026.htm#TXMP2cc78330 Special Rules for  Certain Employees(p48)

This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers.

taxmap/pub17/p17-026.htm#TXMP3a0b0425 Clergy(p48)

If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc., in addition to your salary. If the offering is made to the religious institution, it is not taxable to you.

If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. See chapter 24.

taxmap/pub17/p17-026.htm#TXMP195256cc Pension.(p48)

A pension or retirement pay for a member of the clergy is usually treated as any other pension or annuity. It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A.

taxmap/pub17/p17-026.htm#TXMP5492ffc2 Housing.(p48)

Special rules for housing apply to members of the clergy. Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. However, the exclusion cannot be more than the reasonable pay for your service. If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

taxmap/pub17/p17-026.htm#TXMP16e7fc11 Members of Religious Orders(p48)

If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order.

taxmap/pub17/p17-026.htm#TXMP20f178e1 Services performed for the order.(p48)

If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order.

If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. Any wages you earn as an agent of an order that you turn over to the order are not included in your income.

taxmap/pub17/p17-026.htm#TXMP020383ba
Example.(p49)

You are a member of a church order and have taken a vow of poverty. You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. However, you remain under the general direction and control of the order. You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income.

taxmap/pub17/p17-026.htm#TXMP3c40d82c Services performed outside the order.(p49)

If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements.

• They are the kind of services that are ordinarily the duties of members of the order.
• They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent.

If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. Amounts you receive for these services are included in your income, even if you have taken a vow of poverty.

taxmap/pub17/p17-026.htm#TXMP13141dd7
Example.(p49)

Mark Brown is a member of a religious order and has taken a vow of poverty. He renounces all claims to his earnings and turns over his earnings to the order.

Mark is a schoolteacher. He was instructed by the superiors of the order to get a job with a private tax-exempt school. Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order.

Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. The wages Mark earns working for the school are included in his income.

taxmap/pub17/p17-026.htm#TXMP0e85adb8 Foreign Employer(p49)

Special rules apply if you work for a foreign employer.

taxmap/pub17/p17-026.htm#TXMP3c962c66 U.S. citizen.(p49)

If you are a U.S. citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income.

taxmap/pub17/p17-026.htm#TXMP25aab9d6 Social security and Medicare taxes.(p49)

You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government.

taxmap/pub17/p17-026.htm#TXMP11859129 Employees of international organizations or foreign governments.(p49)

Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States).

Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true.

• You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States).
• Your work is like the work done by employees of the United States in foreign countries.
• The foreign government gives an equal exemption to employees of the United States in its country.

taxmap/pub17/p17-026.htm#TXMP11392955 Waiver of alien status.(p49)

If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. See Foreign Employer in Publication 525.

taxmap/pub17/p17-026.htm#TXMP776c03ae Employment abroad.(p49)

For information on the tax treatment of income earned abroad, see Publication 54.

taxmap/pub17/p17-026.htm#TXMP1abef2d0 Military(p49)

Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. Allowances generally are not taxed. For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide.

taxmap/pub17/p17-026.htm#TXMP5aabf0a4 Military retirement pay.(p49)

If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan.

For more detailed discussion of survivor annuities, see chapter 10.

taxmap/pub17/p17-026.htm#TXMP4af2fcfb Disability.(p49)

If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later.

taxmap/pub17/p17-026.htm#TXMP5a572690 Veterans' benefits.(p49)

Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). The following amounts paid to veterans or their families are not taxable.

• Education, training, and subsistence allowances.
• Disability compensation and pension payments for disabilities paid either to veterans or their families.
• Grants for homes designed for wheelchair living.
• Grants for motor vehicles for veterans who lost their sight or the use of their limbs.
• Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death.
• Interest on insurance dividends you leave on deposit with the VA.
• Benefits under a dependent-care assistance program.
• The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001.
• Payments made under the compensated work therapy program.

taxmap/pub17/p17-026.htm#TXMP663d6372 Volunteers(p49)

The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions.

taxmap/pub17/p17-026.htm#TXMP0e1ee59d Peace Corps.(p49)

Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax.

taxmap/pub17/p17-026.htm#TXMP0caefe35 Taxable allowances.(p49)

The following allowances must be included in your income and reported as wages.

• Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States.
• Living allowances designated by the Director of the Peace Corps as basic compensation. These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses.
• Leave allowances.
• Readjustment allowances or termination payments. These are considered received by you when credited to your account.

taxmap/pub17/p17-026.htm#TXMP1ec34d88
Example.(p49)

Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account.

taxmap/pub17/p17-026.htm#TXMP71a7a40b Volunteers in Service to America (VISTA).(p49)

If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages.

taxmap/pub17/p17-026.htm#TXMP0d59fc1b National Senior Services Corps programs.(p49)

Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs.

• Retired Senior Volunteer Program (RSVP).
• Foster Grandparent Program.
• Senior Companion Program.

taxmap/pub17/p17-026.htm#TXMP755acb6a Service Corps of Retired Executives (SCORE).(p50)

If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income.

taxmap/pub17/p17-026.htm#TXMP0e82322f Volunteer tax counseling.(p50)

Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE).

You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. See chapter 24.

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