Checks made out to Pastor - Is there a loophole?

Question

I have a question for the accountants out there. I am changing the names to protect both myself and the church. Lets call the church First Church of America, and the Pastor John Smith.

The church pays Pastor Smith a salary of $1 per year, and provides other expenses like house and car. The church does not accept tax deductible donations. Any checks made out to "First Church of America" are returned. Instead, the church has the members write their checks to "Pastor John Smith" himself. Pastor Smith then declares this as taxable income (I think) and then he donates to the First Church of America as he sees fit (unknown if he makes these as tax deductible donations).

This church supposedly has 15 law firms working for them, and I'm sure one or more are tax attorneys. They seem to have gotten away with this for around 30 years. I don't understand how they do it. What tax loophole are they using? Why don't other churches try this if this church can do it?

Concerned

Steve · Accepted Answer

it's probably not a church under Internal Revenue Section 501(c)(3) and the "donations" are not legally tax deductible. A real church would want IRS tax exempt status but this sounds like some kind of personal "Church of Pastor John". If no one actually deducts it on a tax return or claims income it could be "gifts" subject to gift tax regulations. You could check out

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Rusty · Answer

What accountability does Pastor John Smith have to his members?

Apart from any dubious tax dodge there appears to be ample room for Pastor John to earn a lot more than other pastors in similar size churches.

I would be very wary of any church that allowed such a scheme.

Ken

Concerned · Answer

Ken,There is almost zero accountability from Pastor John to the church.  Nodemocracy in the church because Pastor John says there is no democracyin the Bible.Your statement of ample room for Pastor John to earn more than his peersis an understatement.  His $10 million dollar mansion is just the tipof the iceberg.Yes, I am wary of such a church, and there is no way I am getting anywhere near it.-----------Steve-I do think it is a non profit church corporation.  I found the organization listed on

Rusty · Answer

Hi Steve,I wonder how he would explain this passage;(Eph 5:15-21) See then that you walk circumspectly, not as fools but as wise, 16 redeeming the time, because the days are evil. 17 Therefore do not be unwise, but understand what the will of the Lord is. 18 And do not be drunk with wine, in which is dissipation; but be filled with the Spirit, 19 speaking to one another in psalms and hymns and spiritual songs, singing and making melody in your heart to the Lord, 20 giving thanks always for all things to God the Father in the name of our Lord Jesus Christ, 21 submitting to one another in the fear of God.He may be avoiding accountability to his flock but there is One Who will hold him accountable!Ken

oh well · Answer

Does the church have a well grounded, effective lightning rod?

Checks made out to Pastor - Is there a loophole?

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