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I asked this question on the LBYM board (the general catchall), as I didn't know where else to go. Then I was directed here. My question is whether or not parishoners of a church are liable for the administrators not following through on filing with the IRS? Thanks.

http://boards.fool.com/Message.asp?mid=22611060

--Xenonax
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My question is whether or not parishoners of a church are liable for the administrators not following through on filing with the IRS?

Only in the sense that if there are penalties to be paid, the money has to come from somewhere. People within the congregation or on the staff who are responsible for tax compliance may be held personally liable if withholding taxes aren't paid over.

In order for the church's tax exempt status to be revoked, resulting in no deductions for contributions, there would have to be major misbehavior outside the tax arena, e.g., getting heavily involved in partisan politics. Routine tax filing and payment compliance wouldn't be an issue.

Phil
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My question is whether or not parishoners of a church are liable for the administrators not following through on filing with the IRS?

The IRS can be more patient with a church than individuals. It is the employees which should be concerned. Those signing the checks that have personal liability and those who withholding and social security payments are being mishandled.

A friend's church was in bad shape. Having had turn over in ministers there was not consistent management. They were in trouble with the IRS and the church hierarchy then a tree limb dropped into the chapel. The building had been declared a historical building and they also had to deal with the historical society plus the insurance company and finding parts of the building had no foundation.

Fortunately, the friend has recently married and his wife is auditor. She was not amused. Payroll was the first item to be handled. It was outsourced which means that games can not be played with withholding and no one in the church is liable for withholding. The IRS contacted them shortly afterwards. Having already turned payroll over to a payroll service bought them some credibility and time with the IRS.

Debra


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I asked this question on the LBYM board (the general catchall), as I didn't know where else to go. Then I was directed here. My question is whether or not parishoners of a church are liable for the administrators not following through on filing with the IRS? Thanks.

What sort of filings do you have in mind? Churches are specifically exempt from filing most returns with the IRS. The only ones that I can think of quickly that are required are employment reporting (941, W-2, 1099-MISC) and unrelated business income (990-T). Failure to file employment returns (and more importantly, failure to pay over the withheld taxes) can lead to serious problems.

Ira
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I think you need to consult a lawyer specializing in taxation issues.
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I think you need to consult a lawyer specializing in taxation issues.

Why? Ira hit the nail on the head, and several other posters were on the money as well, just not as complete.

Further, if you're going to get a hired gun, why not an accountant? Or an EA? A CPA? In any case, you would not need someone specializing in just tax issues, but in non-profit tax issues.

Non-profits are very different from most other corporations in the way they are organized, operated, and taxed. Viturally nothing that applies to a general business corporation applies to a non-profit. And churches (along with religious non-profit organizations in general) are a special sub-set of non-profits. Things that most non-profits need to do (like file form 990) churches don't need to do, or need to do slightly differently.

There are very few professional of any type (legal or accounting) that really know non-profits. Therefore, they are also very costly.

--Peter <== a CPA, who knows that non-profits are different, and who hasn't touched one professionally in many years.
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