Church Leaders Can Be Personally Liable for Unpaid Payroll Taxes
Recently a federal court in North Carolina ruled that a minister met the definition of a “responsible person” under section 6672 of the tax code, and therefore the IRS could assess a penalty against the pastor in the amount of 100 percent of the payroll taxes that were not withheld or paid over to the government by the church.
The most significant federal reporting obligation of most churches is the withholding and reporting of employee income taxes and Social Security taxes. Church officers and directors (and in some cases employees, such as administrators or bookkeepers) can be personally liable for the payment of income taxes and Social Security and Medicare taxes that they fail to withhold, account for, or pay over to the government. It does not matter that church leaders serve without compensation, so long as they satisfy the definition of a “responsible person” and act willfully. In the March edition of Church Finance Today, Richard Hammar explains the three factors that determine whether a person is responsible, and how churches should respond to ensure their payroll tax obligations are correctly handled to protect staff and volunteers alike.
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(Source: Christian Newswire)
