Many nonprofit organizations are exempt from income tax.
Although they do not have to pay income tax themselves, they must still withhold income tax from the pay of their employees. Social security and Medicare taxes. Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. See Members of recognized religious sects opposed to insurance in section 4.