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If Your Church Hasn’t Done This It Is Out of Compliance

11/21/2017

When people join a church or a member accepts an appointment to a position within that Church, most have no clue as to what they have agreed. Most of those joining a local Church do so out of a sense of “need to belong,” and this is a good thing—every Christian should be a member of a local Church. Most of those who accept a position in the Church, i.e. Deacon, Elder, Treasurer, Board Member, etc. do so out of their desire to serve Christ by serving the local Church body. However, there are things that both—those joining a Church and those accepting a position in a Church—should research prior to doing either.

Becoming a member of a Church or accepting a position in a Church may place that individual in a precarious situation because of Internal Revenue Service (IRS) Regulations.

Responsible Party Provision Act

The IRS considers anyone who has control over Church property, finances, and with decision-making ability in such areas, a responsible party. This includes everyone from the Pastor to the members (in certain Church Government structures). In the event of IRS violations by the Church, responsible parties could be subject to fines, penalties, and in some scenarios, criminal charges.

Within a Congregational (Democratic) Ruled Church environment, everyone who is a member with voting rights would be considered a responsible party.

Before someone joins a Church, he or she should familiarize themselves with that Church Government structure and then proceed with prayer and caution.

Members who accept a position within their Church should ensure that the Church is legally compliant with all IRS regulations. The candidates to those positions should insist they see a Compliance audit prior to placement.

Join the local Church; accept a position of service within the Church, but do extensive due diligence prior to either action. Failure in either of the above mentioned scenarios could place the new member or the new Church official in a legal quagmire. This quagmire may not only affect the individual, but in some cases could have a negative outcome for any family members.

For instance, in the scenario of a member accepting a position in the Church, that member should be aware that according to Treasury Regulation 53.4958, the IRS can fine church officers and their family members severally up to $10,000.00 for mi-use of church funds even if it was unintentional. In its broadest interpretation this means that even a Board Member’s baby in a crib could be liable for a $10,000 fine.

IRS Requires A Church to Report any Changes to their Responsible Parties

According to T.D. 9617, the Internal Revenue Service requires Churches to report any changes to those considered a part of their responsible parties. If there has been a Pastoral change; if new Board Members, Deacons, Elders, and/or Trustees have been installed (and in its broadest sense could apply to new Church members in a Congregational Ruled setting); the Church is responsible to notify the IRS of those changes. These changes must be reported on IRS Form 8822-B.

Has your Church complied with this IRS requirement? If not, your Church is out of compliance and out of order.

This Is Why You Need Us!

Chitwood & Chitwood is the premier Church Growth, Management, and Compliance firm in the nation. For more than 79 years we have provided Management and Compliance oversight to thousands of Churches nationwide. At our Church Management Conferences across this nation, we teach that which every Pastor and Church Leader should be aware.

For those we represent, we ensure their Churches are maintained in full IRS compliance and litigate on their behalf involving any IRS questions or concerns.

It is imperative that every Pastor and Church Leader attend the next available seminar—even if it requires hours of travel to the venue location. Every day you procrastinate your attendance to one of these seminars possibly places you under the IRS microscope.

To attend the next conference, please visit us online at www.cmtc.org or call our office at 800-344-0076! Get compliant or you may very well be a statistic.

Our firm will fix whatever is wrong and fight on your behalf. Act Now!

By Dr. Michael Chitwood

Are Your Church Contributions Safe for Tax Purposes

11/14/2017

Over the years our Government and the Internal Revenue Service (IRS) has stripped away at our allowable deductions for income tax purposes. The supposed reasoning was to streamline the tax code and bring more revenue into the Government coffers. However, the tax code has not been streamlined or simplified, and regardless of the amount of revenue, the Government continues to outspend income.

One of the few deductions remaining for the average tax payer is that of Charitable Contributions. Churches depend on the money donated to them on any given Sunday to offset their weekly budgets, and the generosity of so many who donate to Churches and Ministries, are motivated by the fact that they are still allowed to deduct those gifts from their annual income tax return.

With all of this said, there are some issues of which we need to be aware.

Do Not Earmark Donations for Specific Individuals

Private Inurement is a “no no” for Churches. The Inurement clause states that Churches are not allowed to benefit private individuals. According Eric Roberts from the IRS, if anyone earmarks a donation for a private individual, the donation will not be allowed.

The Church counting office or Treasurer should have a rubber stamp that declares, “Not for Contribution Credit,” and every donation earmarked for benefitting an individual should be clearly documented as such.

Giving donation credits to individuals who are not authorized them, may invoke civil and criminal penalties to the responsible parties of that particular Church. Do Not Test the Waters, or Seek to Circumvent This!

Do Not Allow Bartering

A common practice within Church circles is people, especially Church members, who will buy items for the Church, donate them, and then want contribution credit. This practice may be costly for the Church and/or the individual. Although there are ways to recognize those non-monetary contributions, it may prove costly for the donor.

Do not allow people to purchase flower arrangements to place on the pulpit for Sunday service and then want contribution credit. Do not allow them to buy supplies, equipment or donate time, for contribution credit. Instead, have them donate the dollar amount of the item or supplies they want to give the Church and then the Church make the purchase. This may seem a little asinine, but it will protect all parties, and the dollar donation amount (unless earmarked for the benefit of a specific individual) will be an allowable deduction.

If they insist on giving the item, instead of cash, only write a letter describing in entirety what was donated. Do not place a dollar amount on the letter. Leave any amounts to be determined by the individual and his or her tax preparer.

Make sure that all donations are either, Tithes, Offerings, Mission Fund, or Building Fund. Do not think you can slip something by the IRS. They know what to look for on a tax return. Cheating on your donation credit is not going to reduce your tax liability enough to make it worth you going to prison. “Give to Caesar that which belongs to Caesar” and you will not have any problems.

How We Can Help

These and other “hot topic” IRS issues are discussed in-depth at our Church Management and Tax Conferences across the USA. After attending one, the Pastor and Church Leaders will have clear direction on what they can and cannot do. Pastor, Church Leader, Do Not Think you can do Church books without the instruction you will receive at one of these conferences.

This is why it is vital for each Pastor and Church Leader to attend the conference nearest them, NOW! Your procrastination may be the downfall of your Church and Ministry. Contact us today to register by visiting www.cmtc.org or call us at 800-344-0076. You will be glad you did.

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

If Your Church Hasn’t Done This It Is Out of Compliance

Responsible Party Provision Act

IRS Requires A Church to Report any Changes to their Responsible Parties

This Is Why You Need Us!

By Dr. Michael Chitwood

Are Your Church Contributions Safe for Tax Purposes

Do Not Earmark Donations for Specific Individuals

Do Not Allow Bartering

How We Can Help​

By Dr. Michael Chitwood

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