Blog Archives

What You Mean for Good, May Result in Serious Liability

12/30/2016

It is normal for most, which are familiar with a Church setting and its operation, to assume that the Church has at its heart and as its motive, the best interest of its membership and those whom regularly attend. In all the years connected with Church and its day-to-day operations, I attest that this is, for the most part, true.

However, what about those times when someone within the Church, intends to do what they feel is the right thing to do, but in the long run may destroy an individual or bring serious liability issues to the Church and staff? Or, do those scenarios even exist within the confines of Churches and their membership? The answer to this previous question is a resounding yes.

In decades of Church attendance I have often witnessed scenarios when the actions of one member embarrassed or brought about significant emotional damage to another member or visitor. This happens often when someone requests prayer for, or wishes to add someone to a prayer list. The motive is right, but the method may be wrong. In their attempts to engage others in prayer for that special need, they often reveal information that should not become public knowledge.

Right Motive, Wrong Method

He Pastored a small country Church. To his members he was a God-send, whom they loved and cherished deeply. Within the first year of his Pastorate, the Pastor became emotionally withdrawn and somewhat moody. One Sunday while the Pastor was on vacation, one of the members who had become close to the Pastor, decided it would be a great time to call the congregation to prayer in behalf of their beloved man of God. Unfortunately, the member divulged very private, confidential information that the Pastor had shared with him.

The member made aware to the congregation that their Pastor had been molested as a child at a Church Youth Camp by a camp counselor. Because of that molestation, he had since suffered several bouts of severe depression. While the member’s motive was right, his method was wrong. After returning from vacation the Pastor had several members approach him, making him aware of how sorry they were that he had been molested as a child by a youth camp counselor. They also informed him that they were praying for total deliverance, so that “demon” of depression would never trouble him again. It wasn’t long before the information was known by the little country community, creating an embarrassing scenario for this hurting Pastor.

Right Motive, Wrong Method, Tragic Result

The Pastor, rightfully so, felt betrayed by the member with whom he had shared his most hurtful and confidential experiences. He resigned as Pastor and left the ministry. Although that is bad enough, within a couple of years of resigning, a professional counselor suggested that he file a lawsuit against the Church and the member for their actions.

The Pastor won his suit and was awarded a sizeable judgment. The court judge ruled that the actions of the Church and its membership were an actionable invasion of the Pastor’s right to privacy.

Another instance is the court case of MITNAUL, V. FAIRMOUNT PRESBYTERIAN CHURCH. The Church posted Mr. Mitnaul’s emotional and physical condition, and recovery on the Church website. Mr. Mitnaul sued the Church and received a sizeable judgment. Once again, the Church had the right motive, but their wrong method cost them dearly.

While most of those whom are hurt by these types of actions simply leave the Church, it is not unusual for some to seek civil action.

We can Be Right, but Still Be Wrong

While a requesting prayer for someone or adding someone to a prayer list is usually a good way for the Church to be aware of those needing prayer, the Church must also take into consideration the legalities and liabilities that may occur. This is especially true when information concerning a member is posted on the Church website. Anything posted on a website has the world as its potential audience. Therefore, the liability damage may become astronomical.

Nothing personal should ever be made publicly available in an open Church setting, nor should anything be allowed to be published on the Church website without proper, in-depth scrutiny by responsible parties within the Church. This is why Churches need Chitwood & Chitwood!

How We Can Help

Chitwood & Chitwood is the ultimate Church Management and Accounting Firm in the world. For more than 78 years we have provided Churches with the needed resources to ensure that each of our Churches are protected from IRS infringement and issues of personal and congregational liability.

At our weekly Church Management and Tax Conferences we provide the latest updates to regulations that may impact a local congregation. It is in the best interest of every Pastor and Church Leader to attend the next Church Management and Tax Conference nearest their city. Pastors should not attend without the Leaders and the Leaders should not attend without the Pastor. The few hours you spend in one of these conferences may save you and your Church a lot of heartache, and even possible prison time. Every moment you procrastinate may be placing you and your Church in danger.

To register for our next conference visit us at www.cmtc.org or call us at 800-344-0076. You will be glad you did.

While others do this for an occupation, we do it because it is our ministry.

By Dr. Michael Chitwood

What You Need to Know for this Tax Season

12/27/2016

We are approaching one of the most dreaded seasons in our Nation. Not a season of winter, or drought, but the dreaded tax season. Every year about this time people begin to gather receipts and other supporting documentation needed in preparation of their annual tax returns. This is especially true for Ordained and Licensed Ministers.

We need every legal advantage available, including knowledge of which others might be unaware if we are to obtain the largest refund possible. In today’s blog I wanted to make the reader aware of information that may be overlooked by others, or may seem insignificant.

Standard Deduction vs Itemization

Every year tax payers struggle with, “Do I have enough to itemize?” Sometimes it may not benefit to itemize, and other times it may. As tax payers we need to know which is best and how to get the most from each.

The Standard Deduction Amount for this year’s return is $12,600, plus an additional $1,250 for the spouse age 65 or older. Singles get $6,300, or $7,850 is the tax payer is at least 65. Head of Households come in at $9,300 plus an additional $1,550 once they reach 65.

Some tax payers may not have enough to itemize this year, however, the Internal Revenue Service allows for some deductions to be delayed until next year’s return. In this scenario the tax payer could claim Standard Deduction for this year, as he or she looked ahead at itemizing on the next return. It also works in reverse. If your itemized deductions top the Standard Deduction, you could shift some write-offs to 2016 and claim the Standard Deduction for 2017.

It is all about legally working within the system to get you the largest possible refund.

One thing that can greatly reduce the tax liability by increasing the Itemized Deduction amount is gifts to be considered as a “gift” for federal gift tax purposes. If you want to get it in for this year’s return make sure that the donee deposits your personal check by December 31st. It is not sufficient that the donation is received by the donee by this date, but it Must Be Deposited by the 31st. Then the money will count as a 2016 gift for federal gift tax purposes. For those who wish to donate via certified check, the amount is deductible if it is in the possession of the donee by December 31st, regardless of whether or not it is deposited by year-end. If you are giving securities, endorse them over to the donee and deliver them by year-end if you want the gift to count for 2016. The IRS allows a $14,000-per-donee gift tax exclusion for this year. If you do not take advantage of it this year, the unused amount is gone forever.

Any charitable donations are considered in the same manner. Make sure they are in on time to be deposited by the organization by year-end.

Standard Mileage Rates for 2017 for Businesses and Churches

The Internal Revenue Service last week announced the standard business mileage rate for 2017. If your church uses an accountable reimbursement plan—and reimburses ministers and staff for any miles they drive on behalf of the church using their personal vehicles—the rate offers a simple, effective way to make proper calculations.

The 2017 rates are down slightly from 2016 for business-, medical-, and moving-related miles driven. The rate for miles driven by volunteers on behalf of charitable organizations—which is set by Congress, not the IRS—remains fixed at 14 cents per mile. Make certain to review the various changes now, in case your church’s approach requires any adjustments for the next year.

Remember, if your church reimburses its ministers and staff below the IRS-approved standard business mileage rate, then those ministers and staff may be able to deduct the difference on their taxes. Conversely, if your church reimburses above the rate, then the difference must be counted as taxable income.

Is Your Tax Preparer Being Scammed?

The Internal Revenue Service has issued warnings that scammers are targeting tax preparers with bogus e-mails. The e-mails ask the preparer to update their IRS e-services account.

The scammers are attempting to gain access to preparer’s usernames and passwords, which can result in them obtaining personal information from filed returns.

Always remember that the IRS does not send out e-mails for this purpose. Warn your preparer to not click on any links. The scammers may also use the telephone, so hang up on any calls that ask for such an update.

In Closing

The above mentioned tidbits are vital information for this year’s filers. At Chitwood and Chitwood we extend every effort to provide you with the necessary information to make your job as easy as possible.

While other preparers may not be as knowledgeable as they should on tax preparation for Ministers, we invite you to allow us to do your taxes. Last year we completed more than 31,000 and drastically lowered the tax liability for each. We can do the same for you.

Call us NOW at 800-344-0076 and allow us to do what we do for thousands – protecting your hard earned money. Our 78 years of expertise is why you need us in your corner this year. Don’t delay. Make that call!

Remember, for Chitwood and Chitwood it is “A Ministry – Not A Job”

By Dr. Michael Chitwood

We Can Do for Your Church and Pastor What Others Wish They Could Do

12/22/2016

Within the halls of both Houses of Congress in our Nation’s Capital are lobbyists who are busily attempting to influence the House and Senate in favor of their clients. This has been part of the political process for years.

Although we do not have a professional lobbyist in Washington, D.C. we work diligently with representatives, doing everything within our power, to ensure that there is a voice for the Church of the Lord Jesus Christ. This is evident by two programs that have been put on the back burner that would have negatively affected the Church and local Pastor.

The first is that of requiring Social Security Numbers for tax donation credit. Although the IRS still has plans to implement this fully, due to diligent efforts we have been able to get them to list this program as only voluntary. This has bought the Churches some time to implement strategies to prevent any reduction in charitable giving when the IRS does initiate a full-blown SSAN demand for tax deductible charitable gifts.

The second victory for us is the decision to keep the Social Security wage base unchanged for 2016. This will possibly change in 2017 and it is huge. The plans to increase Social Security to 19.6% may likely be implemented in this coming year. If so, it will be devastating for Pastors and Ministers who have not opted out of Social Security Retirement.

For Pastors and Ministers who remain in the Social Security Retirement System this is the equivalent of a 5% pay decrease for 2017.

These are just two of the many areas that we took to task for Pastors, Ministers, and Churches across America.

A Friend You Can Count On

This is not something that Chitwood and Chitwood just started. We have been diligently working for Pastors, Ministers, and Churches for more than 78 years! The reason? For us it is “A Ministry – Not A Job!”

Just as Pastors have been called to preach the Gospel, win sinners to Christ, and be a Shepherd for the “flock,” we have been called to make sure that the job of the Pastor and Minister, and the function of the Church does not get bogged down with the minutiae that the world attempts to lay at the feet of the Church, which will keep Church and Pastor from fulfilling the Great Commission.

Friends are a unique bunch that comes in all types of packaging. There are the fair weather friends who are there for you during the good times. There are the friends that are “need-based” friends and are connected to you because of what you may do for them. As long as you can help them they are by your side. Then there are the real friends. These are friends who are not only with you during the good times, but also during the bad. This is Chitwood and Chitwwod. We have stood with more Pastors, Ministers, and Churches during financial and/or tax crises than any other Church Financial Firm in the USA. If you are our clients, we don’t lose. If you are not, but connect with us after the fact, we stay by your side through thick and thin, fighting diligently for your vindication (It is much easier and cheaper for us to keep the IRS from you than it is to get them off of you).

This is why we are unique in what we do! There are many copycats in America, but only one original. It is like an artist’s painting – he has the original from which many prints are made. The print may be okay, but it does not have the value of the original. In the art world only one person may own the original, while the rest settle for a copy. However, with Pastor, Minister, and Church finances, everyone can have the original – Chitwood and Chitwood. Why settle for a copy, when the original is at your fingertips?

In Closing

For years I have lived by an old proverb: “You are stuck with family, but you can choose your friends.” You will choose us because of our reputation, our quality of work, and because no situation is too hard for us – we are the best and will not leave you.

As the New Year is ushered in, every Pastor and Minister should make the change they know they need to make for their ministry and their Church. Do not go through 2017 without us in your corner.

Call 800-344-0076 NOW or visit us at www.cmtc.org to for the nearest Church and Clergy tax Conference. If you attend a conference you will have the opportunity to engage our Church and Clergy tax professionals at a huge discounted rate. Our guarantee is that we will not leave you, but work above and beyond to make sure your ministry, your Church, and your personal finances remain in compliance and worry free.

By Dr. Michael Chitwood

Just Because the Donation Was to the Church Doesn’t Qualify it as Tax Deductible – Part II

12/15/2016

As we discussed in the previous blog, Christmas is a most generous time of the year. Those who are not philanthropic the first 11 months of the year are often overcome by a sense of need to give of their bounty to others. For others it is the time of the year when additional tax deductions are needed, and therefore, they will give a little more to their local House of Worship.

Just because the gift is to a Church does not make it tax deductible. There are rules that must be met if the donation is to be granted tax deductible status.

There Are Rules Attached to Contributions

There are limits to the amount of contributions a taxpayer may deduct. Most contributions are limited to 50% of adjusted gross income. If it is capital-gain property, the limit is 30%. Contributions to private foundations and certain other organizations are limited to 30%, while capital-gain property to them is limited to 20%.

Any taxpayer that incurs out-of-pocket expenses on behalf of the Church may deduct the cost of those expenses. However, volunteers cannot deduct the value of their time or services rendered on the Church’s behalf.

The donor and donee should take extra precaution with noncash donations. The Church cannot assess a value to the contribution. This responsibility is solely that of the donor.

If automobiles, boats, or airplanes are given, there are rules the IRS has put in place to stop taxpayers from claiming a value far in excess of the actual value of the vehicle. When a vehicle is donated, if the Church sells the vehicle, the donor may only deduct the amount for which the item was sold. If the Church keeps the vehicle to use to further its exempt purpose, or donate it to a needy family, the taxpayer may deduct the fair market value. The Church must provide the donor with a 1098-C within 30 days of the sale of the vehicle, or within 30 days if the Church keeps the donated vehicle. Much information must be included on the 1098-C. Contact Chitwood and Chitwood at 800-344-0076 for information on the proper preparation and filing of this form. Failure to file it correctly may result in penalties for the Church.

If there are goods or services received as a result of the donation, other than non-tangible spiritual benefits, or education, the donation is not tax-deductible unless the token gift received is $9.10 or less for contributions of $45.50 or more in a given year.

If a volunteer incurs out-of-pocket expenses that exceed $250.00 in the performance of duties for a single event for the Church, the Church is to acknowledge that expenditure with a letter to the effect that the expense was incurred by the volunteer on behalf of the Church. The letter can only acknowledge the volunteer’s participation. It cannot assign a dollar value. Let me remind the reader that one’s services are not deductible!

Contributions Made to an Individual

If a donor makes a gift to someone within the Church, the individual does not get a tax-deduction for that contribution, neither does the one receiving the gift report it, because the contribution did not occur through the Church.

The Pastor cannot receive gifts from the Congregation in lieu of a salary. The IRS would rule that such a gift was disguised as compensation and would be taxable. This applies only in cases when the Pastor has rendered no special services for the member.

Virtual Money

Virtual currency such as Bitcoins, are a type of unregulated, digital money. Federal guidelines do not recognize this as cash for purposes of charitable contributions and therefore is treated as a noncash gift.

In Conclusion

This blog is just a small sample of the precautions which should govern contributions. This is why Churches should outsource to Chitwood and Chitwood! As the ultimate authority in Church and Clergy Tax issues, all of our staff are highly trained and motivated to ensure the protection of the Church and its contributors.

Just because the section on Schedule A for charitable contributions seems simple and straightforward, there are exceptions and what seems simple can become complicated. At Chitwood and Chitwood we know the details of charitable contributions that are necessary so that the maximum deductions for those contributions may be obtained. Contact us at 800-344-0076.

Do not trust just anyone – trust the best!

By Dr. Michael Chitwood

Just Because the Donation Was to the Church Doesn’t Qualify it as Tax Deductible – Part I

12/13/2016

As we enter the Christmas season, many become benevolent in their nature—giving to different charities, including Churches. We must be cognizant to properly classify gifts donated to the Church or to those within it.

Not all, but many who make charitable contributions do so with intentions of claiming them as deductions on their tax returns. For any donation to be accepted as a tax-deduction, the Church is tasked with a responsibility to ensure those contributions are proper and that the Church could receive the donations as tax-exempt.

The Internal Revenue Service lists qualifying organizations in Publication 78, but unfortunately not all Churches are listed within its pages. Some feel that a Church is automatically exempt simply because it is a Church. Although section 170 of the Internal Revenue Code states that donations to Churches are tax-deductible and therefore many Churches do not file for their own 501(c)(3) because of one statement in section 508(c)(1)(a). This section does state that Churches do not have to APPLY for 501(c)(3) status. However, according to the Taylor vs. The Commissioner case, the Court ruled that section 508(c)(1)(a) only relieves Churches from applying for a favorable determination letter regarding their exempt status, but it does not relieve a Church from having to meet the requirements of section 501(c)(3).

Although it relieves the Church from applying for the favorable determination letter, that Letter of Determination is the “Proof Document” that allows all donations to the Church to be tax deductible. Remember, the allowance of a tax deduction for any gift is solely at the discretion of the IRS (Jack Taylor vs The Commissioner). Jack Taylor’s Church did not have a Determination Letter and the Judge ruled that neither Mr. Taylor, nor the Church proved his organization was a Church (even though they were conducting regular worship services). None of Mr. Taylor’s donations (several thousands of dollars) were allowed and resulted in him paying more taxes, and penalties and interest.

Another case of interest is the District of Columbia Appeals Court Ruling in the case of Branch Ministries and Pastor David Little vs The Commissioner, the District of Columbia Court of Appeals ruled against Branch Ministries.

The IRS revoked the (501)(c)(3) status of Branch Ministries (a Church) which resulted in an unsuccessful suit against the IRS. The Church also lost on appeal. Below are some excerpts of the Appellate Court’s decision:

The Code, in short, specifically states that organizations that fail to comply with the restrictions set forth in section 501(c) are not qualified to receive the tax exemption that it provides. Having satisfied ourselves that the IRS had the statutory authority to revoke the Church’s tax-exempt status, we now turn to the free exercise challenges. . .

[If audited] contributions will remain tax deductible as long as donors are able to establish [to the IRS’s acceptance] that the Church meets the requirements of section 501(c)(3).

Herein, lies the problem. A contribution to a Church that is not an official 501(c)(3) may never be called into question by the IRS. However, if it is, the donor must prove that the “Church” is in fact a Church to the acceptance of the IRS. Remember the above case of Taylor vs The Commissioner; the Judge ruled that neither Mr. Taylor, nor the Church proved his organization was a Church (even though they were conducting regular worship services).

Unless a Church is officially listed in Publication 78 and an IRS Determination Letter is awarded, all donations are subject to scrutiny and possible denial by the IRS. This is why every Church must register for 501(c)(3) status – not because the IRS demands it, but to protect the donations made to it.

In Conclusion

In our next blog we will provide the regulations that must be met for a donation to be receive tax deduction status. Until then I would urge everyone to attend the nearest Church Management Tax Conference during the upcoming winter schedule. Remember, it is not what you know that will hurt you—it is what you don’t know.

To register, visit us at www.cmtc.org or call us at 800-344-0076. You will not regret this time you invest in your Church’s well-being.

What You Mean for Good, May Result in Serious Liability

Right Motive, Wrong Method

Right Motive, Wrong Method, Tragic Result

We can Be Right, but Still Be Wrong

How We Can Help

By Dr. Michael Chitwood​

What You Need to Know for this Tax Season

Standard Deduction vs Itemization

Standard Mileage Rates for 2017 for Businesses and Churches​

Is Your Tax Preparer Being Scammed?

In Closing

By Dr. Michael Chitwood

We Can Do for Your Church and Pastor What Others Wish They Could Do

A Friend You Can Count On

In Closing

By Dr. Michael Chitwood​

Just Because the Donation Was to the Church Doesn’t Qualify it as Tax Deductible – Part II

There Are Rules Attached to Contributions

Contributions Made to an Individual

Virtual Money

In Conclusion

By Dr. Michael Chitwood

Just Because the Donation Was to the Church Doesn’t Qualify it as Tax Deductible – Part I

In Conclusion

By Dr. Michael Chitwood

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Standard Mileage Rates for 2017 for Businesses and Churches

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