Is Your Church Subject to an IRS Audit?
I don’t know of any letters or words that strike fear in the heart of individuals like the three dreaded letters, IRS (Internal Revenue Service). It is probably only second to the word “cancer.”
Many Churches feel as if they never have to worry about a visit from the IRS. That used to be almost true. In years past, before the IRS could perform an audit on a Church, the Internal Revenue Service had to follow guidelines outlined in Section 7611. That section of the IRS code required “an appropriate high-level Treasury official” to approve a tax inquiry on a Church. Those days are gone forever.
If a Church is audited after the 7611 wall is successfully maneuvered, there is no hope of appeal for that house of worship.
Church audits are up over 50% from the past year and the statistics are changing daily. The reason for the increase is because the IRS is gradually eroding the 7611 audit threshold. This is due to the addition of the Affordable Care Act to IRS oversight and the ability to perform Employment Tax (941) audits.
Many Pastors’ Heads Are in the Sand
While conducting a recent Church Management Tax Conference, an African-American Pastor politely informed me that his and other African-American Churches did not have to worry about the IRS because the President had assured them that he was their friend and would protect them from infringement into their records. The only problem is, that for the past 7 years there has been a steady increase in the number of Churches audited, and a majority of those have been in African-American places of worship.
Just a few weeks prior to this blog, I sat with a Pastor that arrogantly told me his Church books and records were in order because he had a former H & R Block tax expert managing the financial records of the Church. Upon asking a few simple questions of the Church bookkeeper it was evident that they were far from IRS compliance, and yet the Pastor continues to feel as if he is exempt from IRS Scrutiny.
Internal Revenue Service Actions
Due to the Affordable Care Act (ACA), the IRS is now performing random, on-site audits of Churches. In performance of those audits, 941 Employment Tax audits become “fair game” for the auditor. 7611 requirements are non-existent for ACA and 941 audits.
In performance of those audits, the auditor may seek to view the facility and may ask questions. Anything that ignites suspicion during the audit or walk through will flag a more in-depth review, which usually creates some problems for that Church.
The last thing any Church needs is to be bogged down in an IRS audit. Not only is it stressful, it may provide serious criminal and civil ramifications for the Church.
What You Need to do Immediately
Every Pastor and Church Leader should contact our office, Chitwood & Chitwood, to schedule an on-site compliance audit immediately. If the Church cannot afford an on-site audit, its Leaders (including the Sr. Pastor) should register and attend the soonest and nearest Church Management Tax Conference to learn how to get compliant and retain our services via a discounted system.
There is absolutely no time to loose or waste. Every Pastor and Church Leader should immediately call 800-344-0076 or visit us at www.cmtc.org to register. We have a conference near you. It will be the best day you have ever invested in for your Church and Ministry.
Remember, for others this is an occupation, for us “It is A Ministry—Not A Job!”