In a letter written in 1789 to Jean-Baptiste Leroy, Benjamin Franklin penned those words that are often still quoted: “In this world nothing can be said to be certain, except death and taxes.”

The church knows a great deal about death. Numerous topics related to death are etched into the teachings of the church: physical death, spiritual death, eternal life, Christian funerals, dealing with grief, trusting in God, and living by faith are but a few.

But when it comes to taxes, the church is often confused at best and ignorant at worst. While churches have been given a tax exempt status, they still have responsibility to comply with employment taxes as well as many federal and state guidelines. For instance, with only a few exceptions, churches are exempt from state sales taxes, local property taxes, and corporate income taxes.

On the other side, churches are required to withhold and file employment taxes including W-2s and Form 941.

For many years Denton Baptist Association has offered a free Tax Seminar with separate sessions for ministers and for churches. Each year several churches and individuals have discovered that they have been operating under various misconceptions. Some of these have even been perpetuated by CPAs who were not familiar with some of the unique provisions and requirements for ministers and churches.

Some of the most common tax mistakes made by churches include:

• Failing to issue W-2 forms to their ministers
• Withholding FICA from a minister’s wages
• Failing to withhold income taxes and FICA from a love offering for an employee
• Declaring some things as deductible contributions that are not.
  

Churches also fail to pass along some benefits allowed by law that cost nothing but reduce a minister’s individual tax responsibilities:

• A car allowance given to a minister is nothing more than additional salary. For thereto be a tax benefit, an accountable reimbursement policy must be established by the church in which a minister reports specific business mileage and purpose and then is reimbursed for those miles at the rate set annually by the IRS.
  

• A church may pay a minister and his family’s health insurance premiums directly thus providing a tax free benefit.
  
• Housing allowances must be approved by the church for a specific minister and in a specific amount prior to the allowance being paid – it cannot be retroactive.

Those are the common knowledge bits of information. I encourage every minister to attend the morning session of the Tax Seminar on January 7 and every church to be represented in the afternoon session by whoever has the greatest responsibility for the church finances. There are many more things to learn in addition to any new changes for 2010.

Death and taxes are certain – but the opportunity to learn and understand a church’s full tax responsibility is also a certainty at the DBA Tax Seminar.