Unpaid Payroll Taxes: A Hidden Liability for Churches and Leaders

Church Law & Tax | 3/26/2019 | Staff
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The news: “A company’s CFO is liable for its past-due employment taxes, a court says. He had control over the company’s bank account and oversaw all aspects of the firm’s operations and finances, including payroll, tax return preparation and personnel matters. He knew that the firm failed to deposit payroll taxes and file tax returns when due. He had check-signing authority and paid creditors before IRS. That makes him liable for the tax shortfall” (The Kiplinger Tax Letter, Feb. 8, 2019).

The Church Law & Tax take: The case referenced by The Kiplinger Tax Letter involved a motion for summary judgment by the government against the company’s CFO, a certified public accountant who was caught in 2009 embezzling from the company. The CFO’s actions resulted in more than five years of unpaid payroll withholding taxes by the company, or more than $11 million total. Throughout the scheme, the CFO told the company’s board the company was financially strong and meeting all of its tax obligations.

CFO - Felony - Theft - Property - Worth

The CFO was charged with first-degree felony theft of property worth over $200,000 in 2013, pled guilty, and was sentenced to 10 years in prison. Separately, the IRS instituted $4.3 million in penalties against the company’s founder, indicating he faced personal liability as a “responsible person” of the company. The estate of the founder, who had since died, legally challenged the penalties, prompting the government to file a counterclaim naming both the founder and the CFO. Earlier this year, a federal district court in Texas found the now-imprisoned CFO was a “responsible person” and ruled his “failure to pay taxes was willful,” making him responsible for the $4.3 million, plus interest.

Why is this issue relevant to churches? The IRS watches this issue closely, doling out billions of...
(Excerpt) Read more at: Church Law & Tax
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