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Taxable Income

Correctly report tax liability with this helpful reference guide.

Taxable Income

Many churches do not understand that most benefits constitute taxable income. If a benefit is taxable and is not reported as taxable compensation by the church or the recipient in the year it is provided, the IRS may be able to assess intermediate sanctions in the form of substantial excise tax against the “disqualified persons” (generally, an officer, director, or relative of such a person) regardless of the amount of the benefit.

For this reason, ministers should be familiar with the components of taxable income to insure that they are correctly reporting their tax liability. Some examples of items that often constitute taxable income but are often overlooked include:

Additional reading

Many of the items above are linked for further explanation about taxable benefits. For more information and examples of taxable benefits, see these two resources:

Go to the next article, “Public Accommodation Laws,” or return to “15 Things Richard Hammar Wants Pastors to Know,” to choose an article of interest or that fits a particular need.

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

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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Posted:
  • March 3, 2020

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