When it comes to the IRS and religious organizations, these organizations fall into two categories – churches and other religious organizations. Due to the First Amendment, the IRS is extremely reluctant to tread in the area of church organizations. This is not to say that churches have carte blanche to ignore the tax laws, but that the IRS grants them a great deal of leeway in regulating them. All religious organizations are subject to the law in regard to taxation. However, many operate as if the laws do not apply to them. Some of the most common mistakes made by religious organizations are the subject of this article.

At the outset, it should be noted that churches do not have to apply for 501(c)(3) status. They may choose to do so, and there are some very good reasons that they might wish to make such an application. All other religious organizations must apply for this status by completing and filing Form 1023 or Form 1023EZ. A church is automatically treated as though it has 501(c)(3) status.

Filing a return. Churches do not have to file a Form 990. However, some churches file these returns. This is unnecessary and may cause the IRS to take a closer look at the organization. If you don’t have to file, don’t file. Read More