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Church Payroll Tax Audits—the IRS Is Watching

Church Payroll Tax Audits—the IRS Is Watching

Get these files and paperwork organized to stay prepared.

You may have heard that the Internal Revenue Service hasn't been auditing churches since 2009.

This is generally true because of the challenge the IRS faces with clearing the hurdles of the Church Audit Procedures Act (IRC 7611). For several years now, the IRS has been unable to finalize regulations related to the law concerning who is a "high ranking" IRS official authorized to approve church income tax audits.

However, based on what I'm told by churches and tax professionals, the IRS is active in church payroll tax audits. These audits are not subject to the IRC 7611 limitations.

Two reasons may be driving this IRS activity with churches:

Limited resources. IRS officials consistently say their funding is tight. In addition, a string of congressional investigations involving the IRS in recent years has cost the agency millions of dollars and diverted IRS staff members from their regular work to instead provide information to Congress.

As a result, there generally appears to be some strain on the IRS's availability for in-depth audits. However, payroll tax audits generally take a few days, making them easier to schedule and conduct, even with these resource limitations.

The Affordable Care Act. The Employer Shared Responsibility provisions of the Affordable Care Act (ACA) begin to unfold in 2015 for large employers, including churches that meet the definition of a large employer. A large employer is one with the equivalent of 50 or more full-time employees (a full-time employee is an individual employed, on average, at least 30 hours of service per week).

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Samuel Ogles

February 03, 2016  11:00am

Thank you, Gertrude! We're so glad that this and other resources we've produced have helped so much. We know how tricky it can be to learn so many church-specific legal and financial tasks. But we also know the great importance a safe, legal, and financially sound ministry has for the church and its members. Thank you for helping serve the church! If you'd be willing to let us use your comments to share our resources with others, we'd love to do that. If so, please contact me by filling out this form, which will put us in touch via email. (Note: You may have to remove spaces in this url before typing it in to your web browser.) http://www.churchlawandtax.com/help/contactus.html - Samuel Ogles Assistant Editor and Marketer Church Law & Tax

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Gertrude Gray

September 12, 2014  8:29am

Articles gave me a complete understanding of what needs to happen when I meet with our Finance Committee. I am an Enrolled Agent, as well as a church officer. But the field of Church law and Taxes was not one of every day tax issued. Signing with Church Law and Tax, gives me access to the information I need. I thank God, that I found your website. I am Truly a Blessed individual.

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