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An Old Scam with A New Twist

2/26/2018

Pastor Jones called our office, upset that he had received a call from “the IRS.” The individual who had called him told him that the IRS had deposited a refund into his bank account in error and that he needed to forward that refund to them immediately.

The Pastor checked his bank account to discover an actual deposit had been made, but how could the IRS make a deposit to his account in error when he had not given his bank account number to the IRS?

Potential Cyber Scams Are Not New

What had happened to Pastor Jones was nothing but an old tax scam with a new twist. For years, innocent people have received calls from someone claiming to be from the Internal Revenue Service (IRS). Some of these calls have threatened the individuals with impending warrants for their arrest due to money the caller claims the individual owes the Federal Government.

Because we provide Church Management Counsel to Pastor Jones and his Church we immediately researched the issue and discovered that, someone had fraudulently obtained his bank routing and account number. The scammers then filed a false claim with the IRS, had it deposited into Pastor Jones’ account. Their intention was to get Pastor Jones to access the money, send it to them and they would be free and clear while Pastor Jones would have ended up with a bill for the claim from the IRS plus penalties and interest.

What Everyone Should Know About Tax Scams

In the old scam, please be aware that the IRS will not call anyone and tell them that a warrant is being issued for them. As a matter-of-fact, if you will call back to the number they provide and call their bluff, they hang up immediately.

As for the new twist on the scam mentioned above, IRS spokesman Eric Smith provided us with the following steps to take should anyone receive a call similar to Pastor Jones.

Mr. Smith suggested that no one return calls to the scammers, and we agree. We know our business which is why we did in this instance in order to bait the scammers. That is why they immediately disconnected.

Appropriate Steps to Take

If money that you were not expecting was deposited into your account from the IRS, you should take the following steps:

- You will need to return the money—just do not return it to those who have called you.

- Close your bank account and contact your tax preparer.

- To return the fraudulent refund, go to www.irs.gov and search for “Topic Number: 161—Returning an Erroneous Refund—Paper Check or Direct Deposit.” Then follow the steps provided in that article.

- If it was deposited into your bank account, contact the “Automated Clearing House” (ACH) department of your bank. See if you can have the deposit returned directly to the IRS. You must also call the IRS to explain why the refund is being returned. Individuals should call 800-829-1040. If you are a business, call 800-829-4933.

- If the erroneous refund came to you as a paper check, write “void” on the back where you would normally endorse it. Then send the check to the IRS location based on the city listed on the refund check. Include a note explaining why you are returning the refund. Make a copy of the check and return the original via certified mail to be on the safe side.

- It is imperative that you return the money as soon as possible. By law, interest may have accrued on the fraudulent refund.

Mr. Smith further advised that these types of scams are another reason why no one should procrastinate in filing their individual tax returns.

If you have fallen for a tax scam, read the IRS’ “Taxpayer Guide to Identity Theft” at www.irs.gov.

Why You Need Us in Your Corner!

Chitwood & Chitwood is the number one Church Management and Accounting firm in the nation. With 80 years of experience we are savvy to everything that Churches and Clergy may encounter.

We file more Ministers’ Income Tax Returns than anyone and get Ministers back an average of $2000 more than other firms. The reason is we have been doing it longer and we know Ministers’ benefits that others do not know.

We encourage you to contact us if you have not filed your return or if it has been prepared send it to us for review prior to filing it. We will review it to see how much we can save you.

At our live Conferences all across the nation we cover this and many other topics of which every Minister and Church Leader should be aware. To register for an upcoming Conference visit us at www.cmtc.org or call 800-344-0076. It will be the best investment you and your Church can make this year.

By Dr. Michael Chitwood

If Pastor Jackson Would Have Listened, He Wouldn’t Be In the Trouble He Is In

2/22/2018

He had attended an earlier Church Management and Tax Conference and heard me teach that a Pastor could not claim all Housing Allowance and no Salary. In our conferences we teach that Housing Allowance should not exceed 50% of the Pastor’s total compensation package.

During that Conference Pastor Jackson seemed argumentative that all of his compensation was much less than he paid monthly in housing expenses, and therefore felt it was only right to list all of his compensation as Housing Allowance, thereby receiving tax free income.

The Difference a Couple of Years can Make

It had been two years since he last attended our Conference, but this time things were different. Pastor Jackson could hardly wait until the morning break, at which he approached me with these words, “I wish I had listened to you.” Conducting hundreds of Conferences each year and meeting thousands of people, I had no clue as to what he was referring.

He then proceeded to tell me how he had disagreed with my statement that Housing Allowance is not to exceed 50% of the Pastor’s total compensation package. After leaving that conference he attended one conducted by another group that pretends to know Church Accounting Law. At that conference that group told him that he could easily claim all of his income as housing and proceeded to tell him how to get away with it.

Unfortunately, a year later the IRS called him in for an audit and penalized him heavily with taxes, penalties, and interest because of improperly calculating his Housing Allowance.

This time when we provided the opportunity for attendees to retain our services he was the first in line.

Cheap Advice Is Expensive

Pastors and Church Leaders all across this nation look for so-called experts to tell them what they want to hear rather than what they need to hear. In the story mentioned above, Pastor Jackson could have saved thousands of dollars in taxes, penalties, and interest had he listened and heeded my advice in the first conference as I read the IRS regulations concerning Housing Allowance. Unfortunately, he had heard other Pastors tell him how they were receiving all of their income tax free so he thought it was legal. The group that told him he could claim all of his income as housing is still teaching this fallacy across the nation and many Pastors are getting caught in IRS audits and paying the penalty for this misinformation.

As a young man growing up I was constantly told, “If something sounds too good to be true, it probably is.” The same is true in matters of Church Accounting Law. Cheap advice is expensive. Although ministers are the least taxed employment group in the nation, the IRS will find ways to get their share and attempts to circumvent the law will only cost you more than you want to pay.

If Pastors and Church Leaders would just “do it right” they would not have to worry about Federal Marshals showing up at their Church as happened in Churches in Texas and Michigan recently.

Why You Need Us!

Chitwood & Chitwood is a third generation company that has been protecting Churches, Ministries, and Pastors for 80 years. WE ARE THE BEST! At our live Conferences across the nation we will tell you what you need to hear rather than what you want to hear. Do we use fear tactics? NO, but if the truth frightens you it is because you and your Church are out of compliance. However, if you will listen and heed our counsel, you can rest assured that your Church books and records will be in compliance with IRS regulations and you will have nothing to fear.

It would behoove every Pastor, Pastor’s Spouse, Church Trustee, Elder, Deacon, and Church Leader to attend the next Church Management and Tax Conference. To register, visit our website at www.cmtc.org or call 800-344-0076. This will be the best investment you and your Church can make this year.

By Dr. Michael Chitwood

Did the Pastor Receive the Proper End-of-Year Tax Document?

2/20/2018

This is the time of the year when people all across the nation are filing their individual income tax returns. In the secular world there is no question as to which form an employee receives from the employer. Unfortunately many Churches are confused as to the proper form they must provide to their Pastor and staff members.

It happened in the suburbs of a large city in Michigan. The Church, with the Pastor’s knowledge, decided to issue 1099-MISC’s to all of the staff. By doing so, they assumed the Church would be exempt from paying the Employer portion of the FICA for staff members who were not ordained ministers (the Church is never allowed to pay any portion of a Minister’s FICA).

Unfortunately one of the musicians was audited and when the IRS agent asked why he received a 1099 from his Church, the musician stated that all employees, including ordained ministers of the Church, had always been issued a 1099-MISC. This prompted an IRS audit of the Church. Because the Church had 15 years worth of records on site, the IRS found violations in all 15 years and assessed a 10 Million Dollar lien against the Church and Trustees.

There Is No Happy Ending for This Church

What makes this story so sad is that after the audit, the Pastor conducted a Board Meeting and informed the Board that the Church would continue to function as it always had, in spite of the IRS findings.

The head Trustee attended our Church Management and Tax Conference the day after the Pastor’s Board Meeting, and with tears in his eyes asked me what he should do. My advice was simple. Since the Pastor did not want to obey the IRS regulations, when the IRS initiated further investigation into the Church, the Head Trustee should turn State’s Evidence and cooperate with the Federal Marshals.

A year later I was back in that city for another Church Management Conference and the same gentleman approached me. This is the story he told: “I did what you advised. When they showed up to further investigate I had everything documented including my rebuke of the Pastor for refusing to obey the regulations and that I had resigned my position.” He then told me how the Pastor had been indicted and the Church property had been sold to satisfy the IRS debt. Neither the Church nor the Pastor has the legal right to determine how to classify an employee. All who are paid by the Church must be classified according to IRS regulations.

A Huge Penalty for Misclassifying Employees

Everyone working inside the Church, Janitors, Nursery Workers, Musicians, and Pastoral Staff, etc. are employees and must receive a W-2 for the income they received. And this is especially true for the Pastor. According to Code Section 1.1402(c) of the Internal Revenue Service, no one is a self-employed independent contractor if he or she performs services as a minister. The penalty for misclassifying employees as independent contractors is huge.

Included in this income must be their Gross Pay including any bonuses, “love offerings,” etc. The Church must also pay the Employer portion of FICA (currently 7.65%) for all employees who are not ordained ministers performing sacerdotal duties.

Operating Legally is Much Less Expensive

While Churches issue 1099’s to employees in hopes of saving money, the cost to the Church, when it is caught, will be much greater than the dollars spent to operate according to the law.

In addition to operating according to the Laws of the land (Romans 13:1-6) you must also operate according to God’s law and Jesus said, “Render to Caesar that which is Caesar’s” (Matt. 22:21).

Pastor and Church Leaders, the IRS may not have yet knocked on your door, but God has. It could be that your Church struggles financially and numerically because you have violated God’s law in attempts to save a few dollars. GOD WILL NOT BLESS A MESS!

You Need To Contact Us NOW!

Pastor, if you have been issued a 1099-MISC from your Church; or Church Bookkeepers, if you issued 1099s to all whom you paid this past year, you and your Church are in trouble. You need to call us NOW!

Chitwood & Chitwood is the premier Church Management firm in the nation. With 80 years of experience we know exactly how to fix this problem now. The last thing you need at your Church is for the IRS to show up at your door. To alleviate these and other problems you must call 800-225-5849 and ask for Mr. Tim Haney. He will get you and your Church on the road to compliance and fix any problems of your past. Do not wait until they catch you.

We encourage every Pastor, Church Leader, and Church Bookkeeper to attend the nearest Church Management and Tax Conference where you will learn the latest regulations of the IRS and how to avoid the penalties they will assess. To register, visit our website at www.cmtc.org or call 800-344-0076. It will be the best investment your Church makes this year.

An Old Scam with A New Twist

Potential Cyber Scams Are Not New

What Everyone Should Know About Tax Scams

Appropriate Steps to Take

Why You Need Us in Your Corner!

By Dr. Michael Chitwood

If Pastor Jackson Would Have Listened, He Wouldn’t Be In the Trouble He Is In

The Difference a Couple of Years can Make

Cheap Advice Is Expensive

Why You Need Us!

By Dr. Michael Chitwood

Did the Pastor Receive the Proper End-of-Year Tax Document?

There Is No Happy Ending for This Church​

A Huge Penalty for Misclassifying Employees

Operating Legally is Much Less Expensive

You Need To Contact Us NOW!​

By Dr. Michael Chitwood​

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There Is No Happy Ending for This Church

You Need To Contact Us NOW!

By Dr. Michael Chitwood