Out of Compliance, but Didn’t Know It

8/20/2018

Deacon Smith boastfully told me as he checked in for the CMTC Conference in Mississippi, that he knew their Church was obeying all IRS regulations and that he couldn’t understand why the Pastor insisted he attend. Early into the first session that morning, I could see a look of despair upon his face. During the morning break he came to me asking if he could retain our services, because within 30 minutes of that first session he came to the realization that his Church was in deep trouble.

Most Churches think they are obeying all IRS regulations or mistakenly think that IRS regulations do not apply to a Church because of “Separation of Church and State.” Most Churches do obey some of those requirements, but below I have focused on one simple regulation which 88% of all Churches knowingly or unknowingly violate.

It’s Not What You Know that Will Hurt You

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 misuse 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 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!

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.