Why Pastors Must Pay Federal Income Taxes

I consult with pastors on salary issues all the time, and I can not stress enough that a pastor MUST report income no matter what that income is called. Many pastors do not receive a paycheck. The receive a ” love offering ” more often than not the church does not provide a 1099 to the pastor and the pastor does not report it to the IRS as income. When consulting with these pastors I advise them that any money received for services is considered income regardless of the amount or what the income is called. Income is income and must be reported.

A federal court rejected a couple’s claim that they were entitled to an exemption from federal income tax because they “labor for the ministry.” The court concluded, “Income received by ministers whether from the church itself or from other private employers or sources is not exempt from income tax. The income received by taxpayers must be included in gross income required to be reported for income tax purposes according to the Internal Revenue Code.” The court acknowledged that ministers’ income (from the exercise of ministry) is exempt from federal income tax withholding but noted that “while certain income of ministers may be exempt from withholding of income tax, the income received by ministers, even from religious activities…is not exempt from payment of income tax.” Further, “the fact that a church itself may be exempt from payment of income taxes does not mean that the income received by ministers is exempt.” Pomeroy v. Commissioner, 2003-2 USTC 50,568 (D. Nev. 2003).

The IRS and courts have deemed dozens of arguments against paying taxes frivolous, including these:

The Sixteenth Amendment (which permits a federal income tax) is invalid because it contradicts the Constitution.

A taxpayer can escape income tax by putting assets in an offshore bank account.A taxpayer can eliminate tax by establishing a corporation sole (discussed below).

A taxpayer can place all of his assets in a trust to escape income tax while still retaining control over those assets.

Nothing in the tax code imposes a requirement to file a return.

Filing a tax return is voluntary.

Because taxes are voluntary, employers don’t have to withhold income or employment taxes from employees.

A taxpayer can refuse to pay taxes if the taxpayer disagrees with the government’s use of the taxes it collects.Income received in the form of paper currency (Federal Reserve notes) is not legal tender, since it is not redeemable in gold or silver, and is not taxable as income until paid in gold or silver.

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