12/21/2007

How to cheat on minister's taxes

Spent too much for christmas? Here's a few tips on how to get it back by cheating on your income taxes

23 comments:

John Mark said...

this is the first time i have heard of opting out of SS cheating. I know a guy who does it, and i thought it was great when i heard about it. i am approaching retirement with no pension from my church, i came in under a new set of rules set up in '95, and i would love to have all the money i have paid into SS tucked away in a mutual fund.

jack said...

My view is there are legitimate conscientious objectors (to war or Social Security) but to become a CO just to keep from going to war, or to become a CO against Social security just to save money, one would have to tell a lie. It isn;t a choice that can be made as an investment choice--it is a matter of conscience.

Some older ministers have suggested we just opt out and invent our own money, but I value my integrity too much to li in saying I am a CO "for religious reasons" --it would really be just for money's sake.

Lawrence W. Wilson said...

How about this:

We don't cheat on our taxes becaue God has already blessed us so much that we have more money than we actually need. We give some to the government because we believe in the value of providing security for people--escpecially old, sick, people--and we're glad the government is willing to do that ... even if the church won't.

Anonymous said...

when i first started out in ministry, some fellow pastor came to my house and tried to convince me to opt out of SS... i didn't, and i'm thankful.

when i've designated housing allowance, i've had board members at every church i've served complain about the "break" i was getting through housing allowance, professional expense, and fsa (medical savings account). i've responded by saying, "join the club and start paying 15.3% tax rates."

i recently attended a new pastors' orientation where there was much confusion regarding tax laws, housing allowance designations, and all things financial for ministers (and some of these "new" pastors had been in ministry over 20 years, and the ds didn't know what he was talking about, either).

keith, please tell me the good profs at iwu are doing a good job educating up-and-coming ministers about handling finances with regard to all the special tax laws, etc.

Anonymous said...

keith, your post brings up an important corollary...

at one time i was a senior pastor, and felt it was very important for me to know that my staff were all tithing. after all, if leaders don't tithe, why should we expect our followers to tithe?

i found out they weren't tithing. well, in their minds they were, but...

one guy was making 48,000 a year (PLUS benefits of health insurance, pension, and professional expense). so the 48,000 was exclusively salary/housing.

what he was doing, though, was designating 18,000 for housing, meaning his salary was now 30,000, and he was only tithing on that amount (the 30,000, not 48,000). i encouraged him to immediately begin tithing on the 48,000, but he didn't respond favorably. was this wrong thinking?

i've always understood that ministers should tithe on their salary and housing funds, and that to do anything else is cheating the system. i tithe this way myself, and saw this as cheating when he didn't.

we're not talking taxes here, so sorry for the rabbit trail, but it's an important corollary i'd enjoy hearing your thoughts on. besides, if i shouldn't have been tithing on my housing allowance all these years, God owes me some money! (just a joke, folks, you can handle it)

left coast drury said...

Couple thoughts:

There is an underlying premise that I am not sure should go completely unchallenged. Are all laws created equally? Are tax laws more like speed limits? Are pastors cheating when they exceed the maximum posted speed? Are some forms of cheating acceptable and others not?

The IRS may consider it cheating if a pastor doesn't declare an honorarium as income, but who makes the IRS the ultimate arbiter of cheating. Gifts are not income to recipients. While most pastors expect to paid for things like weddings and funerals, I doubt a typical local pastor would ever claim a right to be paid in the same way I could demand my employer pay me for my work or a plumber could demand payment for fixing a clogged drain. If there is no right to demand payment--just hopeful expectation--that sounds more like a gift.

Just because the IRS thinks this is income rather than a gift, who says there is no room for reasonable disagreement. I sense a surprising kind of patriotism in your post--somehow because the US Governments says something is cheating, it is. Why do we give a pass to the Chinese underground pastor who fails to report illegal religious activity but not the US pastor who treats an honorarium as a gift.

::athada:: said...

Just make sure you don't say anything about paying tax on eBay income. My conscience is clear (ignorant) for now...

Anonymous said...

Good reminder to report those honoraria.

(Though I have yet to be paid for a funeral. ;) )

Christy Lipscomb

Kris said...

sneaky.

JohnLDrury said...

"Now we know the law if we’ve read this column." Ha!

To Left Coast Drury, I might suggest that the author of this column is not merely deferring to the IRS as the arbiter of cheating (though he is doing that in some sense) but also concerned with the credibility of pastors/churches and trying to protect them by informing them indirectly. The credibility gap is great and is increasing, and if the local church ministers want to differentiate themselves from the TV preachers under investigation right now, they need to make sure they are clean.

Keith Drury said...

hanks for the comments here... it is a touchy issue and I opened up commenting for anonymous folk this week...

Admittedly I am a hard-liner on this issue, mostly because I've seen too many preachers bragging about cheating successfully (and urging my ministerial students to do so as well).

A troublesome issue is opting out of SS claiming a religious objection, to such insurance programs in an Amish sort of way... few ministers can in good conscience do that even though they urge younger ministers to do so. Perhaps that got the discussion sidetracked and the other issues of more blatant hiding of income got smoked over (though Adam Thada did give some examples)

Left Coast Drury (a lawyer, no less) raises the deepest question. To what extent is government the arbiter of cheating, or any other wrong? And to what extent can a Christian lie or cheat or steal or take drugs, or defy immigration laws or refuse to return fugitive slaves and not be culpable before God?

My own general approach to this has always reserved this sort of protest to be "in behalf of others." That is disobeying the fugitive slave law or hiding illegal immigrants or smuggling bibles is a risk taken on behalf of others, not for personal gain. I've been more dubious of people (including fellow college students in the 70's who didn't want to get personally killed in Vietnam and all at once became opposed to war). So I'm suspicious any approach that permits a pastor to lie on his or her income tax and swear it is the truth, benifiting form the reduced taxes through lying and cheating. I don't like paying taxes any more than the next guy and take as many legal loopholes as I can... but I can;t bring myself to lie on my 1040 form... not even because I work for God.

Father Marc said...

I am a parish priest in the Lutheran Church (Missouri Synod). The LC-MS makes it clear to all its clergy that IF they opt out of Social Security, they will testify AGAINST them, making it clear that while they cannot speak for personal convictions, our church body holds no moral or religious grounds for conscientious objection.

I think this is an excellent policy, and I was wondering if other church bodies discourage non-conscientious objection (dishonesty AS cheating) in this way?

left coast drury said...

I couldn't resist coming back to share a few more things.

1) Here's a great tax quote that's somewhat applicable here.

Tax Quote of the Week

"The validity of a tax depends upon its nature, and not upon its name."

-- Benjamin N. Cardozo

For other great tax quotes check this link each week:

Washington Hotline

2) Going deeper into taxes--how's that Use Tax going?

My premise here has been that tax laws are more like speed limits--which don't require us to call the appropriate law enforcement agency and report ourselves when we have failed to comply. Rightfully, no one considers us to be "cheaters" when we don't--if a cop catches us we take our lumps and pay the fine.

In some ways the hyper-aggressive enforcement approach of the IRS has resulted in a skewed view of the gravity of an income tax infraction.

For self-professed hard-liners on taxes, the Use Tax can pose a problem. That would be line 19 of Indiana's IT-40 (others just need to Google their own state). If you live in Indiana you have been swearing under penalty of perjury that line 19 is accurate every year. Helpfully, Indiana provides a cheat sheet (pun intended).

Check it Out

A use tax is a sales tax on things purchased out of state and brought to Indiana--including catalog and Internet sales. Have you cheated on your use tax and lied about it? Almost everyone has--it's like speeding, except even trickier to comply with. No free passes, even for those souvenirs you bought in Turkey ;-)

For those of you having an attack of conscience Indiana gives you a form so you can go back through all those past receipts from out of state purchases and pay up. Holiness for Ordinary People might label this Restitution.

No Kidding! (requires Adobe Reader)

When it comes to taxes--I often wonder who is cheating whom. A John Maxwell appearance fee is one thing, but a modest gift following a wedding or funeral is another--what's next--claiming income every time a parishioner buys lunch?

3) Parting shot on Social Security.

We all pay the same Social Security--the self-employed just get to see what the true cost is--"employer contribution" is Congressional smoke and mirrors--that's the employee's money all the same. I don't have much sympathy for pastors grumbling like they pay more--you don't!

That said and since Father Marc has shared about the Missouri Synod's hard-line approach, I would point out that opting out is opting out. Pastors who choose to opt out have no opportunity to collect a benefit--that's not exactly cheating.

While some may consider an opt-out of Social Security on par with conscientious objection to military service--I am not persuaded they are any more related than speeding and murder. Does the IRS get to convert speeding into murder by the way it frames the issue.

Here's the kind of questions the IRS loves:

Pastor, did you stop cheating on your taxes yet?

___ Yes

___ No

Fair question? If you accept it as framed, you are an admitted tax cheat either way.

Keith Drury said...

OK, my nephew Scott has given preachers an easy out for what I called "cheating" positioning it as something like going over the speed limit.... so if you are a minister and looking for soothing words you have them there...

I will stand by my standards on honesty... yes, even to out of state purchases... Scott is not my lawyer and may think I am a fool for being "that honest"... but it is where I stand... if I err I plan to err on the side of honesty as a minister. Perhaps I would have a different view if I were a layman though?

Chap said...

I stopped fretting about clergy taxes and use http://www.clergytaxnet.com/

I suggest being honest, but also using a professional dedicated to clergy taxes in order to also tax full advantage of retaining as much of your money as possible.

Anonymous said...

The honest truth is that I try to be as honest as I can when paying my taxes. I just don't want to pay more than I have to.

The other honest truth is that this whole tax system is so complicated that even though I am doing my best to do things properly, I've got this underlyinging fear that somewhere, somehow, I may have made some minor, inadvertant mistake, and somehow subject myself to the stress of an IRS audit or something, which might find some inadvertant error I've made and not only make me pay taxes on it, but penalties and interest as well.

I'm all for paying taxes, but the truth is that the whole issue is too complicated for me. I generally end up paying a professional to do it for me--I think at the tune of over $500 for my 2006 returns--and still ahve to pay the entire 15% Social Security taxes quarterly because I have the privilege of being considered "self-employed" as a pastor.

By the way, the only reason I am posting this anonymously is because I don't want some overzealous IRS agent to see this post and associate it to me in order to trigger an audit.

Anonymous said...

I think these comments clearly point out some of the contradictions in the holiness traditions...holiness is so often used to redefine the law and to pick, choose, and justify wrong actions.

Because one is now holy and "free", whatever is done with a heart for God and with a "pure" intent, regardless of what the law of God or the law of the land says, it is ok! The law no longer defines right/wrong, love does, so one is free to either expand or delete the requirements of the law at will! On the flip side, you have the law is "it" and if the law says, I have to stone someone or cut off their right hand because they are involved in stealing bread, it matters not whether they stole the bread because they were paupers on the street and nobody, including their government, helped feed them!

These holiness/law extremes have led to many unGodly actions...well, I drowned my 4 children because they were evil and I wanted to stop it out of love for them! NO! I love my children so I take everything they have away from them and make them earn each one of their toys back one-by-one. NO! Well, as with the shooter a few weeks ago, we have done all we can, so now we have to put them in God's hands and they will either have to stand or fall on their own. NO! Even in the wilderness, God made provision, God loved, God taught, God was patient! God chastened! The problem is, holiness makes folks think they are better than God...they can write their own laws, define good/evil according to their will/desires, etc. and the desired outcome or the requirement for punishment is supreme. NO!

Back to the topic, if you love your nation, abiding by the tax laws is not a problem, it shows that you agree with others in the society in which you live that you are going to "prefer others more highly than yourself" and you are going to jointly meet the financial requirements of that society! If you love another society or yourself more, than abiding by the tax laws, put in place to provide for all, will not matter.

The real question here is not about cheating or whether or not one is a lay person or a minister. The real question here is, does the God of Abraham make a difference? Is the God of Abraham really a God of lying, cheating, stealing, killing, beating, etc. as has been demonstrated by such actions as clergy abuse, suicide attacks, genocide, ethnic cleansing, not tithing, disrespect for leadership, cheating on my taxes, and the like. Or, is the God of Abraham, who initially established cohesive societies intended to work together for the benefit of all and for His glory, really God? Is God the God of my taxes? Is God the God of my family matters? Is God the God of my sexual relationships? Or, does God not really matter at all? If He does, what are my responsibilities to myself, my family, my society and my government as a result of His example of a "cohesive society"? And what determines right/wrong...the law of love or the written law?

The written law says, I have to pay my taxes. The law of love says, I have to provide for my family. The word of God says, obey the law and one will not go w/out bread and water. The God of Abraham promised provision, He did not promise indulgence! One must ask him/herself, did the God of Abraham, whom I have also chosen to follow, bring me out of Sodom to allow me to be killed? Did the God of Moses bring me out of Egypt to have Pharaoh come after me and kill me? Did the God of Abraham put me in a society where I am to pay taxes for the benefit of all, regardless of whether or not I agree with them, in order to be destroyed by the requirements of this cohesive society and their related tax system? Sounds foolish, I know; but it is not! People who love God, love others and make an effort to provide for them, as God initially intended. How you pay your taxes does show who you really love and what God you serve!

Anonymous said...

By the way Anon, I think many in the nation share your concern -- self-employed or not!

left coast drury said...

Lest readers get the wrong impression, I haven't been offering legal advice and I don't favor felony tax evasion.

That said, I disagree with Keith's deference to the IRS. The system is adversarial and the IRS constantly overreaches. There is no such thing as an "IRS error in your favor." When in doubt the IRS never favors the taxpayer.

Rick Warren is a good example. In his case a few years ago the IRS cheated--it made up a non-existent limit to his housing allowance and claimed that he was a cheater under the law. The Tax Court said the IRS was making up its own law. There's no telling how many pastors were strong-armed by the IRS to pay deficiency tax and penalties prior to Warren.
Read it yourself

Keith's approach to his income tax is pretty strict and doesn't seem to allow for much disagreement with the IRS.

I don't support a "getting away with anything you can" approach but I do think there is plenty of room to take a contrary position to that of the IRS. If some day in the future, Christy L. holds a funeral and to her great surprise a family member hands her a check afterwards--in light of her past experience and practice (holding funeral for no pay), I think she could honestly and in good conscience take the position that the money is a gift.

For those interested in seeing how the IRS "simplifies" things in ways that favor the IRS and disfavors taxpayers, the Social Security exemption offers an interesting case study:

The statutory exemption is provided in Title 26 Section 1403(e). The relevant part of the statue states:

A minister can provide "a statement that either he is conscientiously opposed to, or because of religious principles he is opposed to, the acceptance ... of any public insurance." 26 USC 1403(e)(1)(B).

The IRS however, does not take this at face value. Here's how the IRS colors the statutory language in its favor. See Publication 517

Its spin on 1403(e)(1)(B) is "To claim the exemption from SE tax [you must be] conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination [And] you file for other than economic reasons...."

See how the IRS takes two options, either based on conscience or religious principles, and squeezes them into one even narrower ground. The IRS says you can only claim an exemption if it is based exclusively on religious considerations (the statute doesn't say this), it can't be general conscience (statute doesn't say this), and more astounding, it cannot include any economic reason (statute doesn't say this). If the IRS is taken at face value--no one can claim an exemption since refusing to pay a tax or receive public insurance is inherently economic--you would always have some economic reason for fling for the exemption. What is Publication 517 then? It is an IRS threat and a way to create its own law.

This is not intended to be legal advice on whether a pastor files or does not file for an exemption. It is intended to show that the tax laws and the vagaries of complying with them are poor litmus tests for moral purity or lack thereof.

On the practical side, for those considering filing for a Social Security exemption--I have personally visited with two pastors in the past year and a half who were not covered by Social Security for one reason or another to talk about their retirement. In both cases, without Social Security--their retirement picture was looking grim--all that money they were saving on taxes somehow disappeared. Think twice about taking an exemption--that social security check might come in handy some day.

Keith Drury said...

My other writing on
Minister's taxes

(the legal loopholes ;-)

Anonymous said...

Left coast sounds like he it trying to justify some of his own questionable actions. As for the IRS the congress and the Senate of the United States has made them the ultimate arbiture for cheating, at least when it comes to tax payments, that is if he lives in the USA. If you don't like their rules leave. Secondly on gifts his rational of "well you can't enforce payment from a preacher like a plummer can force payment for fixing a drain" is not the definition of a gift. One of Webster's definitions is "something voluntarily transferred by one person to another without compensation" it does not question if it is "contractual" or "legally enforceable". If someone pays you because you provide a service or do something for them it is not a gift. Just ask yourself if I didn't perform that wedding would they have given this money to me? If the answer is no then it is not a gift. I think it is pretty funny that I am having to define "gift" to fellow believers who have hopefully have accepted the biggest gift given to man.

Keith Drury said...

ANON. I'll let my nephew (Left-coast-Drury who now lives on the right coast--right in the shadow of the Capitol) defend himself... but I will say that he is an attorney and a layman... so he has nothing to gain personally in this matter. I work the preacher side of the street--cautioning ministers against "cheating" on their income taxes but he works the lawyer side of the street, trying to get ministers the greatest possible advantages they can get without breaking the law.

fairtaxadvocate said...

All excellent reasons to support the "fairtax". See Neil Boortz if you have not heard of the "fairtax". Basically you don't have to worry about what is and is not income, seperating housing expense and better yet not tax returns to file!!!!!!!!!!