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A High Price to Pay

Church pastors, leaders may be liable for not withholding payroll taxes.

In re Vaughn, 2011-2 U.S.T.C. ¶50,681 (E.D.N.C. 2011)

Background. 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 her in the amount of 100 percent of the payroll taxes that were not withheld or paid over to the government by the church. Church leaders should be familiar with this case and its implications.

Without question, the most significant federal reporting obligation of most churches is the withholding and reporting of employee income taxes and Social Security taxes. These requirements apply, in whole or in part, to almost every church. Yet many churches do not comply with them due to either unfamiliarity or financial pressures. This can trigger various penalties. One of the most serious penalties is found in section 6672 of the tax code. ...

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  • March 1, 2012

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