Key point 6-07.08. Church board members who have authority to sign checks or make financial decisions on behalf of a church may be personally liable for a willful failure by the church to withhold federal payroll taxes, or to deposit or pay over withheld taxes to the IRS.
The officers and directors of a church or other nonprofit organization can be personally liable for the amount of payroll taxes that are not withheld or paid over to the government. Section 6672 of the tax code specifies that
any person required to collect, truthfully account for, and pay over any [income tax or FICA tax] who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable for a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
Stated simply, this section says that any corporate officer, director, or employee who is responsible for withholding taxes and paying them over to the government is liable for a penalty in the amount of 100 percent of such taxes if they are either not withheld or not paid over to the government. This penalty is of special relevance to church leaders, given the high rate of noncompliance by churches with the payroll reporting procedures.
This basis of board liability is addressed fully in a companion text. 216 See chapter 10, Section A, in R. Hammar, CHURCH & CLERGY TAX GUIDE.