IRS Ready to Take More From Churches

By Raul Rivera

When the Small Business Jobs Act was signed into law, Section 2102 amended the tax code and more than doubled the penalties for 1099 forms.  Your church can now be penalized for filing it late, mismatching a social security number, or submitting it with a typo.  The problem with this new change in the law is that if you submit a 1099 form with a typo or mismatched social security number, the IRS will not notify you until one year later.  By that time, the penalty will be at its maximum tier, which is currently at $100.00 per form.  Imagine, ten forms equals a $1,000.00 penalty. 

New penalties now in full force

Many churches have guest speakers, contractors, cleaners, landlords and other service providers that should be given a 1099 form.  The problem lies in the fact that most churches in America are not filing the forms, or are missing some every year.  The problem worsens when they fail to properly document guest speakers that are foreign nationals.  The law requires that the speaker fill out form W-8BEN and turn it in to the church, while the church is required to withhold 30% of the offering.  On the other hand, if the speaker wants to claim exemption from withholdings he/she will have to file form 8233.  It can be very confusing and may make you want to not do it at all.  But that is not the answer.  The IRS is ready to collect more penalties this year.  Let us be great stewards of Kingdom resources and learn how to do it right.