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Ministers' Failure to Pay Taxes

What are the consequences?

Colorado
State:

• What are the legal consequences if a minister fails to pay taxes, file tax returns, and keep any records as to his income and expenses? This was the issue before a federal district court in Colorado. A minister did not pay taxes, file returns, or maintain records for four years because of his convictions that only federal employees are subject to the income tax, and ministers are exempt from paying taxes on the basis of the first amendment guaranty of religious freedom. The IRS audited the minister, and "reconstructed" his income and expenses on the basis of Department of Labor statistics. It then assessed income taxes and self-employment taxes for the years in question, as well as a delinquency penalty of 25%, a negligence penalty of 5%, and a penalty for underpayment of estimated taxes. The IRS rejected the minister's claims that he was not subject to tax. The minister appealed ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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