IRS Pulls Out Every Law

2/28/2020

Pastor Simpson called our office in absolute Panic. In 80 years of our firm doing books and record keeping for Churches, I had never personally heard, or heard of any Pastor or Church member in such total despair as him.

Pastor had attended one of our seminars, but thought he didn’t need our services. In his words, “We are only a small country church.” The very thing that initiated the beginning of his problems was one of the many topics that govern Church bookkeeping.

The Ostrich Mentality Created Further Damage

When the notices began arriving from the Internal Revenue Service (IRS), the Church Check-writer threw them away. After reading the first one, she determined that the topic of the IRS notice did not apply to a Church—especially one as small as theirs.

When the Check-writer finally allowed the Pastor to see one of the many correspondences the IRS had sent, the Pastor thought the best thing to do would be to call the IRS for clarification. His call seemed to further support his and the Check-writers outlook of the situation. The agent to whom they spoke new nothing of non-profit and Church law, and proceeded to tell the Pastor that the Church should not worry—everything was ok.

Pastor Missed Another Topic Taught at the Seminar

Sometime during any seminar, we ensure we cover the court case of “Maser v. Commissioner,” (2011). The ruling in that case was as follows:

The law is clear that erroneous legal advice rendered by employees of the IRS generally is not binding on the Commissioner. Dixon v. United States, 381 U.S. 68, 72-73 (1965); Schuster v. Commissioner, 312 F.2d 311 (9th Cir. 1962), affg. in part and revg. in part 32 T.C. 998 and 32 T.C. 1017 (1959); Fortugno v. Commissioner, 41 T.C. 316 (1963), affd. 353 F.2d 429 (3d Cir. 1965). In any event, the Commissioner cannot waive the jurisdictional requirements, and jurisdiction cannot be established by estoppel.

The judge in “Maser v. Commissioner” further stated that it does not matter what an IRS agent tells you—the only thing that matters is what is written in the code.

Pastor Simpson quickly discovers what we have always known, and that is, “Cheap Advice is Always Expensive.

IRS Pulls Out All Stops

What should have been an easy fix, had Pastor Simpson and his Church engaged us at our conference, or engaged us upon receipt of their first notice, we could have solved the issue with no penalty. Unfortunately, things escalated.

Since the IRS did not receive a timely reply to their correspondences, they attacked with full force. When the investigating agent arrived at the Church, they were not in the mood for an exchange of pleasantries.

Unfortunately, and fortunately, the Church contacted us when the agent arrived. It was unfortunate because the IRS had reasonable grounds to dig deep into the records of the Church. It was unfortunate because millions of dollars in fines and penalties were about to be imposed. However, it was fortunate for the Church because we know the IRS better than they know themselves. Our expert team was able to negotiate an 80% reduction in the penalties and convince the agent to not seek criminal charges against the Pastor and Board Members.

Pastor, Board, and Church Still Suffering from the IRS Findings

While Chitwood & Chitwood was able to get the penalties dramatically lowered the result was still a very large penalty for a Church of their size. The IRS agreed to payment terms, but as part of the agreement, all Church assets were frozen, in addition to all personal assets of the Pastor, and Board Members.

To date, their assets are still frozen and some of their small congregation decided it was in their best interest to leave the Church, adding further damage to the Church’s financial standing.

Everything Could Have Been Avoided

Chitwood & Chitwood has been protecting Churches, Ministries, Pastors, and Board Members for more than 80 years. We are the best. As an offshoot of Chitwood & Chitwood, our Church Management and Tax Conferences travel across the nation teaching Church and Clergy Tax Compliance seminars.

Although time does not permit us at the seminars to teach the complexity of the IRS code pertaining to Churches and Ministries, we teach enough of the basics so a Church can determine if they should be concerned. For those who want to engage us, we drastically discount our services, sometimes as much as 75%. We do this so no Church, Pastor, or Board Member can say, “We would love to retain you, but we cannot afford it.”

It is imperative that all Pastors and Church Board Members attend a seminar near them immediately. To register for a seminar please call 800-344-0076 or visit us at www.cmtc.org. If there is no seminar near your location, ask us how you can sponsor one, or ask to be directed directly to one of the professionals of Chitwood & Chitwood to get your Church in compliance NOW!

Remember, “It’s not what you know that will hurt you. It’s what you don’t know!”

By Dr. Michael Chitwood

What You Will Learn at our Conferences

Our Church Management Conferences will arm you with the information you must have to shield your Church or Ministry from IRS intrusiveness; teach you how to get your Taxes to the lowest possible rate; and daily operate your Church or Ministry within IRS acceptable guidelines.

Our Conferences have been taught across the Nation for over 48 years. Because of the Penalties, Fines, and even Imprisonment that the IRS imposed on many Churches and Pastors, Dr. Chitwood felt led by the Holy Spirit to become a buffer between Churches, Ministers, and the IRS.