I continually speak to Pastors and Church Leaders throughout the USA and I am amazed at those whom feel as if they are somehow immune to the Internal Revenue Service and its codes, simply because they are a Church. Some are so naїve they almost flaunt their IRS lack of obedience. In addition to this being criminally dangerous, it is spiritually dangerous. In the context of paying taxes Jesus declared that we are to give Caesar that which belongs to Caesar (Mat. 22:21).
I wonder how many Churches struggle financially because they intentionally violate Mat. 22:21 and Romans 13:1-7? God will not bless a mess and when Church books are not in legal compliance with IRS guidelines it says to God that His Word only has clout when it is favorable to our desires.
According to the IRS tax gap report, underreporting of income is the biggest contributor to the tax gap. According to the report, there is $500,000.00 owed to the IRS and 90% of it is due to underreporting.
Churches are infamous for underreporting. This underreporting most often occurs when Churches fail to report payments made to their Pastors and staff. Pastors, Church Check-writers and Board Members think they are being creative when they give money and call it “love offering,” etc to justify not reporting it as income. Remember, anyone working on the inside of your church (Pastor, Treasurers, musicians, etc.) are employees and any funds provided to them must be reported. Anyone on the outside (independent contractors, vendors, etc.) receiving Church funds must receive a 1099 of some type.
Do not feel as if you are smart enough or saved enough to avoid the wrath of the IRS if you are out of compliance.