3 Laws Your Church Needs to Know

By Raul Rivera

Today, I want to share with you three laws every pastor and church leader need to know.  Ignorance of these three laws can be detrimental while leading a church.  In fact, in every conference we teach, numbers of pastors discover that they have been doing ministry in ways that could trigger the consequences of breaking at least one of these laws.  

On a weekly basis at StartCHURCH, we hold conversations with pastors wherein it becomes necessary to discuss one of these top laws in order to help their churches come into compliance.  It is difficult enough starting a church and getting it to flourish, and it becomes very discouraging when one finds out that his or her church has been getting it wrong for several years.  I encourage every church leader to take a moment and get acquainted with these 3 laws.  Knowing them may one day keep you from trouble.

1. Section 6672:  I begin with this law because it has the potential to cause the most personal damage.  This law allows the IRS to assess what are called "Trust fund recovery penalties" on individuals of the board or others for failure to collect and pay over to the IRS any income or FICA tax from employees of the church.  You may say, "We do not have any employees; we hire everyone as contractors."  Others may say, "We do not have anyone on salary, and our pastor only gets a housing allowance or stipend or other love gifts."  These are the two most common reasons why this law is often violated.  Many churches are under the wrong impression that just because they pay their people as contractors or because their pastor only gets a housing allowance then they are relieved of the requirements of withholding taxes and paying them over to the IRS.  Under this law, if the IRS determines that the church failed to collect and pay over any income or FICA tax and they determine that you are the responsible person, the IRS can assess a trust fund recovery penalty against you of 100% of the tax owed.  For more on this law go to Minister Gets Hits Hard With Trust Fund Recovery Penalty

2. Section 3509:  For reasons beyond the scope of this article, there are thousands of churches that believe that if they classify their workers as contractors that the IRS will be OK with that.  When paying someone for his/her services, you must first use the three-point test to determine if he/she is a contractor or an employee.  In most cases you will realize they are employees. Under section 3509, if the IRS determines that your church wrongfully classified workers as contractors, they have the power to rule that the church should have withheld taxes from the employee and to assess substantial financial penalties against the church.  To learn to properly classify workers at the church, go to https://www.startchurch.com/blog/view/name/the-right-way-to-hire-someone-at-your-church-part-one

3. Section 6721:  This law concerns the failure to file correct W-2's and 1099-Misc. forms on time.   Unfortunately, the burden is on the church to do three things.

a. File it on time

b. Report all of the information and;

c. Include only correct information 

Under section 6721, the IRS has the power to issue penalties of up to $100 per W-2 or 1099 that your church should have filed.  They also have the power to assess penalties for typos.  Over the last two years the IRS has hired thousands of new field agents to conduct audits, collect taxes and verify the accuracy of returns.  With that said, audits are only going to rise.

The dream of a church planter

The dream of every church planter is to be able to give his/her full time and attention to the ministry-to live in that wonderful place of being able to give ALL to that which God has called him/her.  This usually requires them being able to receive a full time salary from the ministry.  However, making that leap is never easy.  The distance between launching a ministry and receiving a full time salary is often a journey that requires discipline, breakthrough, and a knowledge of where the world of ministry if going.con

The world of ministry

The world of ministry today is not what is used to be.  There was a time in mainstream America when a church was considered separate and holy.  No one ever sued church, and government certainly did not pass laws that placed a burden on churches.  That world is something of the past.  Today, we live in a culture that is legislatively hostile to churches and I am afraid that many well-meaning and anointed leaders will hit costly pitfalls.  Today is the day to throw off ignorance and acquire knowledge.  Let us teach you what you need to know.