Church got IRS letter for Form 990

[anu31402]

A pastor (client) received a CP420 from IRS requiring that they need to file Form 990 for year 2007. The church has never received this letter before. Initially, I told the pastor that churches aren't required to file Form 990. But he showed my an exemption letter from irs which approved the church as exempt organization under section 501(c) (3) BUT the letter also stated that Form 990 is required. It is a true church and does not do any other business.

The church's total contributions for 2007 was over $400k. It pays the pastor salary and one administrative staff and renders all FICA, SUTA payments and withholdings.

I have read previous posts on similar topic on the board. Do I get him sign a POA and contact IRS that a church isn't required to file? Need advice on how to address the CP420 letter.

Kay EA

[taxmandan]

Why the 501(c)(3) ?

Why did they file for 501(c)(3) status? Churches aren't required to do so, they have default exempt status, Pub 557. Anyway, the filing requirement is because of the designation as a 501(c)(3). Perhaps they did it for other activities like a Bingo parlor or other non-religious activities they do and as such they do need to file a 990. If not, get the POA signed and call theIRS to see how they can be excluded from this requirement and get the 501(c)(3) status removed.

[anu31402]

Thanks. Should be sending out POA today


Kay EA

[ecb34691]

Make sure it goes to Cincy as that is where the EO's are reviewed not in Ogden where they are filled. Might want to call to get FAX #.

[Burke]

Why did they file for 501(c)(3) status? Churches aren't required to do so, they have default exempt status, Pub 557. Anyway, the filing requirement is because of the designation as a 501(c)(3). Perhaps they did it for other activities like a Bingo parlor or other non-religious activities they do and as such they do need to file a 990. If not, get the POA signed and call theIRS to see how they can be excluded from this requirement and get the 501(c)(3) status removed.

I was just reading in Circular E, Pub 15 that a 501(c)(3) is exempt from FUTA taxes. Is a church which does not have this designation also exempt? (They are exempt from SUTA in my state, I found that.)

[anu31402]

Burke,
I believe churches must pay FICA and SUTA for all other non-ministers on their payroll EXCEPT if they file Form 8274 and get approved by the IRS.

[MAMalody]

Form 990 instructions state on page 2.

The following types of organizations exempt from tax under section 501(a) (section 527 for political organizations) do not have to file Form 990, or Form 990-EZ, with the IRS…..1. A church, an interchurch organization of local units of a church a convention or association of churches , an integrated auxiliary of a church such as men’s or women’s organization, religious school, mission society, or youth group).

I hope this helps.

[anu31402]

Thanks Mike

[MAMalody]

Burke,
I believe churches must pay FICA and SUTA for all other non-ministers on their payroll EXCEPT if they file Form 8274 and get approved by the IRS.

It's not just non-ministers it is any employee that does not qualify as a dual-status minister. That means that, depending on the ministry description, it is possible that ministers such as education, administration, etc could be subject to tax withholding as any other church employee.

[Snaggletooth]

Bulls Eye

Why would an organization with a Free Pass from having to file ANYTHING suddenly file as a 501(c) org? Maybe they thought bringing a bullseye onto the archery range would be harmless since the IRS never lets fly a stray arrow...

[Burke]

Perhaps it is to avoid paying FUTA taxes, etc. I found the answer to my previous question. In Pub 15-A, it states "Other than section 501(c)(3) Organizations: ... these organizations are not exempt from w/holding FIT, SS, or MC tax from their employee's pay, or from paying FUTA tax......"