Jump directly to the Content

Ten Steps to Consider When Embezzlement Is Suspected

How to respond when the unthinkable becomes a reality.

Ten Steps to Consider When Embezzlement Is Suspected
Image: langdu | Getty

Many churches have experienced one or more incidents of embezzlement. In some cases, the amounts are substantial. Church leaders often do not know how to respond to such incidents. Here are ten steps that can help.

1. Tax liability for embezzler

Embezzled funds constitute taxable income to the embezzler. The embezzler has a legal duty to report the full amount of the embezzled funds as taxable income on his or tax return, whether or not the employer reports the embezzled funds as taxable income on the employee's W-2 or 1099. If funds were embezzled in prior years, then the employee will need to file amended tax returns for each of those years to report the illegal income since embezzlement occurs in the year the funds are misappropriated.

IRS Publication 525 states: "Illegal income, such as stolen or embezzled funds, must be included in your income on line 21 of Form 1040, or on Schedule ...

Join now to access this member-only content

Become a Member

Already a member? for full access.

Related Topics:
Posted:
  • April 15, 2021

Related ResourcesVisit Store

Church Finance
Church Finance
Learn about budgeting, financial reporting, tax compliance, insurance coverage, and more.
Your Complete Guide to Virtual Church Meetings
Your Complete Guide to Virtual Church Meetings
A toolkit for legal and compliant business meetings
Internal Controls for Church Finances
Internal Controls for Church Finances
Learn how to protect your church's money.
12 Steps for Sound Ministry Budgeting
12 Steps for Sound Ministry Budgeting
The steps to better plan, organize and allocate your organization’s financial resources