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.