The frequency of payroll audits has surged over the last five years and churches are facing increased payroll scrutiny. Most payroll audits have traditionally focused on whether or not a church is misclassifying an employee as an independent contractor, thus avoiding Social Security, Medicare and other payroll taxes. Churches misclassify anywhere from 10 percent to more than 60 percent of their workers as independent contractors.
Since 2008, states have been springing into action to audit payroll taxes as a way to increase revenue. The increase in payroll audits has also been intensified by the federal government. The U.S. Department of Labor has issued partnership agreements with California, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington to collaboratively investigate more than 6,000 employers for misclassifying employees. The U.S. Treasury estimates that if all employers were forced to properly classify employees it would result in $8.71 billion in added federal tax revenue over the next decade.
We encourage you to review your classification of employees. A payroll audit can be a very expensive proposition for any church, and the recent increase in government scrutiny regarding the issue has escalated the likelihood of an audit. Contact Clergy Financial Resources to learn more.
Clergy Financial Resources
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations