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Why The IRS Prosecutes Some Pastors and Not Others, Part 2
Should I be personally concerned? As you read yesterday's article, you may have had some alarming thoughts cross your mind. I have had conversations with many church treasurers and CFO's that describe the way money is handled, and at times I cringe. The IRS focused on Pastor's Jinwright and Clarke for prosecution. They could have just…
Read Full Article | CommentsWhy The IRS Prosecutes Some Pastors and Not Others
Pastor, Church and IRS In the last year, I have written about two pastors that have been prosecuted by the IRS. One pastor, Gregory Louis Clarke, was sentenced to 21 months in prison for assuming that the love offerings he received from his church were gifts to him. The other, pastor Anthony L. Jinwright, was convicted of fraud and tax evasion…
Read Full Article | CommentsHow a Church Debit Card Can Cause Trouble
The convenience of debit cards "It's convenient and much easier than writing a check," were the words one pastor said as he swiped his card at a Christian bookstore. He was buying research material for a sermon series he was doing on marriage and family. He purchased several books and one set of DVD teachings from a popular Christian speaker. …
Read Full Article | CommentsA New IRS Law That Makes It Tougher on Churches
Every Church in America is required to issue and file 1099-Misc forms. The new changes to the way 1099 forms are issued will cause churches and ministries to come under intense and burdensome regulations. The 2010 Health Care Act under subsection 9006(b)(1) amended old rules and it now mandates all churches, ministries, non-profit organizations and…
Read Full Article | CommentsWhat Soccer Taught Me About the Business Side of Church
Getting your church in order may feel like learning something new. After all, you were called to be a minister not a bookkeeper. That may be true but part of being a minister is being an open letter (books). Your life (which consists of your church's books) needs to be beyond reproach. How can you preach a message of godliness…
Read Full Article | CommentsA Tale of Two Pastors, Part One--Minister's Taxes
Please join me as I take a few moments to share with you the tale of two men who pastored churches in different states. Though they lived almost 1,000 miles apart, they had very similar circumstances. If it was not for the one thing that distinguished their ministries, one would think they were one and the same person. Pastor Smith Let…
Read Full Article | CommentsProtect Your Church or Ministry's Assets!
Every Year Thousands of Churches Lose Assets Unnecessarily! Starting a ministry is one thing, but managing a ministry is a completely different matter! It is my experience that many ministries have a much more difficult time managing their ministries than they do starting them. Don't you know that the call to preach is also the call to stewardship…
Read Full Article | CommentsWhat Tax Forms Does My Ministry Have to Prepare in January?
January is often times busier than December! January is the time of year that many leaders make an effort to keep a resolution of better managing their ministries. Though it be a noble resolution, January may be the most challenging month of the year to keep such goals. It is the month that the ministry must prepare and file tax and informational…
Read Full Article | CommentsCommon Mistakes Made By Ministers that May Take their Churches Down!, Part 3!
A Three-Part Series on Common Mistakes Made by Ministers! Welcome to part three of our series titled "Common Mistakes Made By Ministers." Congress has tightened its grip on the legislation that governs the way nonprofits, including churches and ministries, handle their finances. This gives us good reason to understand the new rules and regulations…
Read Full Article | CommentsCommon Mistakes Made By Ministers, Part 2!
A Three-Part Series on Common Mistakes Made by Ministers! Last week I wrote on two common mistakes made by ministers. Most ministers fail to set up the housing allowance and self employment tax exemption correctly and in a timely manner. They believe that because they are not drawing a salary at the church, they do not need the allowance…
Read Full Article | CommentsCommon Mistakes Made By Ministers, Part 1!
I am not on salary at my church, should I still set up a housing allowance and opt out of self employment tax? This is the time of year when ministers begin to think about going on salary at the church. They wonder about setting up a housing allowance and opting out of self employment tax. When it comes to tax compliance, the most common mistake I…
Read Full Article | CommentsPastors Do Not Own Their Own Sermons!
Most Pastors Are Unaware That They Do Not Own Their Sermons! Many pastors have their sermons recorded on Sundays. They are normally saved in church archives and later used to create sermon series that the pastor sells when he travels. However, they are not aware that it is very likely that the pastor does not own these sermons, nor does…
Read Full Article | CommentsIRS Requires 30% Withholding on Love offerings to Foreign Guest Speakers!
Churches Must Withhold 30% on Love Offerings Paid to Foreign Guest Speakers! Most churches support missions and often times have foreign nationals speak at their church. Whether it be a missions conference or a special service, the love offering, or honorarium paid to the foreign guest speaker, is subject to a Non-Resident Alien withholding of…
Read Full Article | CommentsSpecial Tax Requirements for California Churches and Ministries!
The state of California has been increasing its tax compliance efforts in an attempt to raise tax revenues. Because of these increased efforts by the state, we urge churches in California to become educated about the specific tax rules and registrations that are unique to California. Below is a quick list. Franchise Tax: Every church or…
Read Full Article | Comments5 Things to Consider Before the Year Ends!
1. The $250.00 Dollar Rule for Tax Deductions Did you know that there are special rules issued in IRC 170 that specifically delegate how your church or ministry should treat donations that exceed $250.00 in value? One of the greatest blessings to your church are members who tithe and give offerings faithfully. Your church depends…
Read Full Article | CommentsGet Ready for an IRS Audit!
What are the chances of an IRS audit against my ministry? Good question! Historically, chances have been low...maybe too low. It is a well documented fact that more than 85% of churches have compliance issues. Issues that need resolution. Now that the post-denominational era has been well established, and the majority of church…
Read Full Article | CommentsOur church has made a few mistakes. What can we do about them?
What to do about past mistakes! Many churches that we serve have made mistakes in the the past and are wondering what they can do to correct them. These errors range from years worth of unreported love offerings, to missing W-9's and 1099-Misc forms, to lost board meeting minutes. Some mistakes, like misplaced W-9's, can easiliy be fixed, while…
Read Full Article | CommentsCan the church pay for the pastor's cell phone bill?
Most churches pay for the pastor's cell phone bill! Is that really allowed? A common practice that I see going on in many churches today is the church paying the pastor or founder's cell phone bill. Most churches do it by paying the bill directly on behalf of the pastor. Every month the pastor turns in the cell phone bill and the church writes…
Read Full Article | CommentsA Lesson on the Housing Allowance! Part One
The Housing Allowance is one of the best tax saving benefits that exists for pastors. Every pastor in America, whether or not he or she is on salary at the church, needs to have a housing allowance designation set up at the church. By having an allowance set up at the church, the minister will be able to save thousands of dollars every year in taxes.…
Read Full Article | CommentsChurch Loses Property Over Bake Sales!
Beth-El, an African-American church in the Chicago neighborhood of Englewood, purchased some property on 63rd Street in 1976. The church rehabilitated the property and established itself there. During the years that the church quietly enjoyed its existence on the property, the community improved and the church continued to grow. However, the county…
Read Full Article | CommentsHousing Allowance Rules Most Pastors Do Not Know About!
Did you know that the 2002 Housing Allowance Clarification Act requires that every year you calculate three different scenarios to see which one will be used on your W-2? Most churches have not been following this new rule and may under an audit cause the pastor to owe back taxes. Here is how it plays out. The clarification act requires…
Read Full Article | CommentsCan a Church Get in Trouble for Not Properly Handling Designated Offerings?
Often times, churches and ministries receive designated offerings for building campaigns, outreach programs or benevolence. You may be surprised to know that a large number of churches have trouble properly handling designated offerings. The main reason for this problem is that not many know what the proper procedure is for handling designated…
Read Full Article | CommentsWhat is Taxable Income for a Minister? Part 2
Yesterday you received part 1 of a series of emails titled "What is Taxable Income for a Minister?" Today we will discuss the benefits of income from book or sermon sales or the performance of weddings.Many ministers perform weddings, sell their sermons, books and other teachings in the church book store or as they travel and speak in other…
Read Full Article | CommentsCan Pastors Deduct Tithes as Business Expenses?
Pastors all across America work hard and are underpaid. Statistics show that the average pastor is severely underpaid; more than in any other profession. Many pastors have chosen not to opt out of having to pay social security taxes. Social security tax (otherwise known as self employment tax) is 15.3% of the pastor's income. This means that a pastor…
Read Full Article | CommentsThe IRS May Say That You Are On Salary At the Church, Even If You Believe You Are Not.
Because of the nature of our tax system, while most churches are focusing on outreach and other ministry functions of the church, many pastors and church treasurers fail to think about on taxes. Unfortunately, they miss the mark and often times under report the pastor's income.This happens because there are many pastors that are not on salary…
Read Full Article | CommentsEmbezzlement While Counting Tithes and Offerings!
Counting the church tithes and offerings is where most embezzlement of church occurs. Establishing a procedure of checks and balances is the only way to prevent it from happening. Regrettably, most pastors, though they think about it, never take the necessary measures to implement a procedure prevents this crime from happening. A church in Raleigh,…
Read Full Article | CommentsAll Ministers on Salary at Church Must Get a W-2 by January 31st
Should the Pastor Get a W-2 or 1099-Misc? Some churches give their pastors and other ministers a 1099-Misc each year for their taxes. This is not correct. A pastor must be given a W-2. Under the latest treasury regulations, a pastor is described as an employee for federal income tax purposes but as self employed for social security tax purposes. …
Read Full Article | CommentsCreating a W-2 is not an option!
Under the law, a church must issue a W-2 form to the pastor and any other employee of the church. A 1099-Misc is not the legal way to do it. Most churches do not issue a W-2 and instead give a 1099-misc to the pastor. This is not correct and greatly increases the chances of an audit of the pastor's tax return and also increases the chances of the church…
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