Blog Archives

Is Your Pastor Taking Advantage of Available Tax Benefits

1/31/2017

The Pastor called me and said he had some exciting news that he wanted to share with me. A few moments into the conversation I discovered the news was that his Church was paying for an all-expense paid vacation and intended to make the checks payable to the airline, and hotels. When I questioned him as to why they were doing it in this manner, he informed me that they did not want him to be required to pay taxes on that which they considered as a blessing from the Church.

First of all, I am excited that a Church would have that kind of spirit where they would look for ways to bless their Pastor – rather than be a hindrance to him or her. As much as I was thrilled for him, I was much more shocked at the lack of integrity and the level of possible criminal activity I was hearing.

The days of the Church paying for things for the Pastor to reduce his Federal Income Tax burden are over. It is illegal for the Church to pay the Pastor’s personal cell phone bill from the Church bank account. It is illegal for the Church to send the Pastor on a cruise using Church funds.

As I explained some of the above mentioned items of concern with the Pastor, he began to query as to why a neighboring Church had just bought their Pastor a brand new Cadillac and presented it and the title to him the previous Sunday. His question was how can they do it if it is illegal?

My answer was simple. If the Church pays for an automobile for the Pastor, it must be titled in the Church’s name or the total cost of the car must be included within the Pastor’s W-2 for that year (Board and Pastors should be aware that anything added to the Pastor’s salary must be within the allowable 32.6% of total Church payroll or the Pastor will be placed into the Golden Parachute Rule).

Churches are not allowed to write checks payable to any vendors on behalf of expenses the Pastor may incur or for gifts given to the Pastor unless that expense is one of the 66 Reimbursable Expenses allowed by the IRS. Any checks written to him or her that are not one of the allowable items must be considered as salary and included in the Pastor’s W-2.

The Internal Revenue Service still allows for a Pastor to be well compensated for his or her Ecclesiastical labor, however, the compensation package must be within federal regulations and set by an independent certified organization.

How many Pastors are under compensated for their labor of the Gospel simply because they, or their Board, are not aware of the benefits that are available to every ordained minister of the Gospel? Every Pastor that would implement these 66 Allowable Expense Reimbursement Items would reduce his or her tax liability by thousands of dollars every year.

Get Yours Today

Unfortunately, most Pastors or Church Boards have no clue as to what is allowed. That can change today. Chitwood and Chitwood, the Number One Church and Clergy financial experts have the confidential list of all of the items that are available. Chitwood and Chitwood are the only organization that has this Confidential List. Click on this link now to receive your list: https://cmtc.americommerce.com/store/p/209-Qualified-IRS-Written-Reimbursment-Plan-Documents-66-Benefits-for-a-Minister.aspx

To implement these reimbursement items, the Church Board must approve and sign each one, line item by line item. There can be no “blanket” signature approval.

Chitwood and Chitwood has been successfully educating Pastors and Church Leaders for more than 77 years. No one has done it longer or does it better. More than 550,000 graduates from our Church Management and Tax Conferences attest to our commitment to ensure that the Pastor, Church Board, Trustees and Elders, and the Church financial records are maintained under the highest possible standards and are compliant with State and Federal Regulations.

Everything in life is a choice. You will make the choice to get your Church financial records in order, or you will choose to continue down your current path. Remember, every choice, good or bad, incurs consequences, good or bad. YOU CHOOSE!

Visit www.cmtc.org or call 800-344-0076 to register for a Church Management and Tax Conference near you.

By Dr. Michael Chitwood

How to Terminate a Volunteer—Part I

1/12/2017

The Pastor walked on to the platform during his Sunday morning service and discovered a strong odor of alcohol that seemed to come from the choir. He assumed that the odor must be something else, for surely no one in his choir would be drinking, especially prior to entering Church. When the same odor greeted him the next Sunday, he came to grips with the possibility that someone may be consuming alcohol prior to the service.

The Pastor summoned his “Armor Bearer” and instructed him to locate the person or persons from where the odor was originating. After three weeks of playing Sherlock Holmes, the “Armor Bearer” gave the Pastor two names and exposed two men in the choir, who took a drink every Sunday morning prior to entering the Church. Apparently the two men would disappear behind the Church bus and take a couple of drinks of scotch prior to singing in the choir.

Pastor Versus Two Members

At the conclusion of that Sunday’s service, the Pastor asked to speak to the two gentlemen. In the Pastor’s office, he confronted the two men about their actions. They first denied they had partaken of any alcoholic beverage. However, when the “Armor Bearer” presented his cell phone pictures of the two men engaged in the act, they confessed with the excuse that they were nervous singing before such a large congregation and the few drinks of scotch calmed their nerves, and declared that it helped them to better sing their notes.

The Pastor had become fond of the talent of these two, especially since they had offered some of the best solo performances to the congregation. With much sadness the Pastor expelled them from the choir. Unfortunately, it did not end there.

Everything seemed fine at the meeting’s conclusion. The two were in attendance the following Sunday, seeming to blend in to the congregation. Then the bottom fell out for the Pastor and Church.

The next week, the Pastor was served with a lawsuit from the two. They implied that his actions had caused them embarrassment within the Church and therefore they were seeking financial reward and their reinstatement to the choir.

Unfortunately, when things of this nature happen, it does not remain between the two parties. News quickly travels throughout the congregation and members begin to choose “sides.”

“All Rise”

Hearing this usually means you are in a courtroom somewhere and the Judge has entered. This lawsuit ended in court. The good news for this Pastor was that he had Chitwood & Chitwood in his corner.

We asked the Judge for a Summary of Dismissal on the grounds that the By-Laws we had constructed for the Church included the Scriptural Conduct Living Provision Section (SCLPS), Article 14 Amendment. In the amendment it clearly stated that the Church considered any consumption of alcohol a sin, and therefore unacceptable for any Church member or anyone seeking membership. Both men had signed the SCLPS stating that they were aware of what the Church believed and their agreement to abide by the Church Tenets of Faith.

Within 30 days, the Judge dismissed the lawsuit, and in doing so, vindicated the Pastor and the Church. Had this Church not had the counsel of Chitwood & Chitwood in managing the Church affairs, the outcome may have been devastating for the Pastor and Church.

It is not what you know that will hurt you—it is what you don’t know. In Part II, I am going to show you how to properly handle volunteer staff, and when and how to terminate them properly.

Why You and Your Church Need Us

Chitwood & Chitwood has successfully provided Church Management for more than 78 years. We are the best. Our expert team remains on the cutting edge of Church Management and specialize in the protection and oversight of thousands of Churches across the USA.

The days are long passed when Pastors can just Pastor a Church because of their love for the Kingdom, and expect those in attendance to heed their spiritual counsel. People, including Church members in this generation, are lawsuit minded. The very Pastor they respected yesterday may be sued by them tomorrow. This is why every Pastor, Minister, and Church Leader should connect with Chitwood & Chitwood!

At our Church Management and Tax Conferences across the USA, we inform and/or make available, the latest pitfalls facing the Church and Clergy. This conference is the best 7 hours you can invest in during this year. Every Pastor, Minister, and Church Leader owes it to themselves and to their Church to attend one NOW!

To register for the nearest Church Management and Tax Conference call us at 800-344-0076 or visit us online at www.cmtc.org. You will be glad you did.

By Dr. Michael Chitwood

Things to Consider, Entering the New Year

1/5/2017

The attendance size of the average Church in the USA is 70-100. Pastors and Church Leaders of these Churches usually do not concern themselves with end-of-year issues except providing the necessary giving statements. These same Churches, rarely if ever, engage in new-year planning strategies. They look at the Church mainly as a spiritual entity, and therefore, the upcoming year is simply a continuation of the previous year—in the practice of conducting their worship services, receiving the weekly tithes and offerings, and attempting to grow their ministries while struggling to keep their doors open. This attitude/mentality is a huge mistake.

New Year Planning

An old adage declares, “If you don’t know where you are going, how will you know when or if you arrive?”

Just because the Church is a spiritual entity, with Christ as its Head, does not relieve the Church from engaging in proper planning procedures—the greatest of which should be the first planning meeting of each year. The first meeting of Pastor and Church Leaders should be a time when previous years’ actions are reviewed to determine what worked, what didn’t, what they should continue to do, and what they should cease doing. Why continue doing something that did not work.

The functions of many Churches have nothing to do which God’s plan for that House of Worship, but rather, they are traditions of which the Church has been engaging for years without any visible results.

For instance, I know of hundreds of Churches which engaged in a Watch Night Service on New Year’s Eve. Nothing wrong with that if God told them to do it, but most of them do it for one of two reasons: 1) Tradition; 2) An opportunity to receive an offering prior to year’s end so that the annual budget may be met. The reasoning many use for a Watch Night Service is that they pray the old year out and the new year in, and by doing so, will set a precedent for the members which will make their new year better. Unfortunately, most members are in the same or worse condition as the previous year. This is where planning pays dividends. Plan your year, and then work your plan.

Review the Old before Planning the New

Never plan the new, without first reviewing the old. Sometimes God wants a Church to engage in a new area of ministry, but the Board rejects it due to lack of funds. However, if the Church would remove what has not worked, it would free up funds for the new ministry.

Here are some things that should be reviewed as a Church enters the upcoming year:

- Church Minutes

Church Minutes are required documents that must be maintained. During each annual Board Meeting things are discussed, yet never implemented. They become out of sight—out of mind. Why should a Church plan new ministries or implement new ideas, when it never tried to make previous plans work (unless of course, the Pastor was instructed by God to do so).

- Board Members

As a vital component of a Church, the composition of the Board should be constantly reviewed. The only people that should be on a Board are those who have the Pastor’s heart and vision.

Anyone on a Board that does not share the heart and vision of the Pastor will be the force that will hinder or even halt God’s plan for that local Church. Board Members that were detrimental to God’s plan for that Church should be replaced (There should be a clause in the Church By-Laws that allow for annual removal of Board Members).

- The Annual Budget

Ironically, many Churches do not have an annual operating budget. God will not bless a mess. Churches that are not good stewards of God’s money, will always struggle with finances, and never seem to have enough to implement God’s plan for that Church.

Develop a plan for the Church to actually save money during the upcoming year. Remember, a Church should be as debt free as possible. The borrower is always subject to the lender. Because of community economic issues or inclement weather there may be some lean times during a year. When a Church has money in the bank it reduces the stress on the Pastor and Church Leaders.

- Compensation Packages

A laborer is worthy of his or her hire. This portion of Scripture reference can and should work both ways.

There are some paid staff that have exceedingly proven their worth and should be rewarded appropriately. This is especially true for the Pastor (he that labors in Word and deed are worthy of double honor).

On the flip side of the argument, there are probably some that have not proven their value. It is bad stewardship to pay someone what they are not worth or are not producing that for which they were paid. The Master did not give everyone the same amount. He gave one five, one two, and one, one—based upon their abilities. The last one did not produce and had his compensation removed.

Compensation packages are a huge part of a Church budget and should be constantly scrutinized.

How We Can Help

For more than 78 years Chitwood & Chitwood has been providing management and financial oversight for Churches all across the USA. We are the premier Church Management Firm in the world.

At our conferences Pastors and Church Leaders will discover secrets they need to know and implement to protect their Church from any forces that would seek its demise. To register for the next Church Management and Tax Conference, call us at 800-344-0076 or visit us at www.cmtc.org. It will be the best decision you and your Church make this year.

By Dr. Michael Chitwood

Tax Related Identity Theft and Prevention

1/3/2017

Many of us have either been the victim or know of someone who has been the victim of identity theft. Because of technology and the computer savvy skills of those who commit this crime, it is becoming more common and costly with each passing day.

Identity theft is bad enough, but many are not aware of tax-related identity theft.

Tax-Related Identity Theft

Tax-related identity theft occurs when someone uses your stolen Social Security Number (SSN) to file a tax return to claim a fraudulent refund. The victims may not even be aware this has happened until they electronically file their return only to discover that a return has already been filed using their Social Security Number. Another way the victims may be notified is if the Internal Revenue Service (IRS) sends a letter stating it has identified a suspicious return using their SSN.

Know the Warning Signs

It is imperative that you be alert to any possible tax-related identity theft if you are contacted by the IRS about any of the following:

- More than one tax return was filed for you,
- You owe additional tax, have a refund offset, or have had collection actions taken against you for a year in which you did not file a tax return, or
- IRS records indicate you received wages or other income from an employer for whom you did not work.

Steps for Victims of Identity Theft

The following steps are recommended by the Federal Trade Commission (FTC) for anyone who is a victim of identity theft:

- File a complaint with the FTC at identitytheft.gov
- Contact at least one of the three major credit bureaus to place a “fraud alert” on your credit records:
- equifax.com 1-888-766-0008
- experian.com 1-888-397-3742
- transunion.com 1-800-680-7289

- Close any financial or credit accounts opened by identity thieves

If your SSN is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:

- Immediately respond to any IRS notice; call the number provided, or if instructed, go to idverify.irs.gov.
- Complete IRS form 14039, Identity Theft Affidavit, if your e-file return is rejected because of a duplicate filing under your SSN or you are instructed to do so. Use a fillable form at IRS.gov, print, then attach form to your paper return and mail according to instructions.
- Continue to pay your taxes and file your tax return, even if you must use paper filing.
- If you previously contacted the IRS and did not have a resolution, contact us for specialized assistance at 1-800-908-4490. The IRS has qualified teams ready to assist you.

Reducing Your Risk

Join efforts by the IRS, states, tax industry, and businesses to protect your data. We all have a role to play, and here is how you can help:

- Always use secure software with firewall and anti-virus protections – use strong passwords.
- Learn to recognize and avoid phishing e-mails, threatening phone calls, and texts from thieves posing as your bank, credit card companies, or even the IRS
- Don’t click on links or download attachments from unknown or suspicious e-mails.
- Protect your personal data. Don’t carry your Social Security Card with you, unless it is absolutely necessary.
- Make sure your tax records are secure.

How We Can Help

Chitwood & Chitwood has been the premier Church and Clergy tax professionals in the world. For more than 78 years we have kept Pastors, Ministers, and Church Leaders abreast of current trends and dangers that could impact their personal or corporate ministry.

At our Church Management and Tax Conferences across the nation we teach and/or make available everything Pastors, Ministers and Church Leaders should know to ensure their ministries and Churches are protected from outside forces that seek their demise.

It would behoove every Pastor, Minister, and Church Leader to attend the next available Church Management and Tax Conference. To register, visit us at www.cmtc.org or call us at 800-344-0076. This may very well prove to be the most productive time, apart from preaching, you engage in all year.

Remember, for others “It is a job, but for us it is A Ministry!”

Is Your Pastor Taking Advantage of Available Tax Benefits

Get Yours Today

By Dr. Michael Chitwood

How to Terminate a Volunteer—Part I

Pastor Versus Two Members​

“All Rise”

Why You and Your Church Need Us

By Dr. Michael Chitwood

Things to Consider, Entering the New Year

New Year Planning

Review the Old before Planning the New

How We Can Help

By Dr. Michael Chitwood

Tax Related Identity Theft and Prevention

Tax-Related Identity Theft

Know the Warning Signs

Steps for Victims of Identity Theft

Reducing Your Risk

How We Can Help

By Dr. Michael Chitwood

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Pastor Versus Two Members