IRS and Form 941

[JohnDMeyers]

I mentioned this issue in a thread on the Accounting tab, but I would like to publish it here to help anyone who may be getting letters from the IRS, in general, or about their 941 forms, specifically.

We do not pay FICA for our employees. Those who are required to pay FICA must pay "both halves" of the 15%. Our pastors have all chosen to be exempt. We had to file form 8274 to do this, which we have done.

In 2010, on our W-2 forms, Box 3, Social Security Wages, we put the total wages for our employees, and in Box 4, we entered 0.00 because we withheld $0.00 from our employees.

It turns out, we should have left box empty and box 4 empty.

The IRS compared our W-2s to our 941 quarterly reports and found the discrepancy between the Social Security Wages reported on the W-2s and the 941s.

The letter from the IRS (which came in April 2012 for the fiscal year 2010), said we owed $29,000 for Social Security withholding. (it could have just as easily said we should have left box 3 empty, but it did not).

I have learned not to panic over such letters. We called and got a hold on the penalty and filed amended W2s and W3s. It took about 1 year for the IRS to receive and process them.

Since we made the same mistake in 2011 and 2012, we filed our amended W2s and W3s in anticipation of them finding out. That didn't stop the nasty-grams from coming.

We received another letter in May 2013 about fiscal 2011 being incorrect, a threat to place a lien on our bank accounts and an amount due of $22,000.

I called, got the hold placed on the penalties, and told them about that we already filed the amended forms. It is now 2/19/14 and they won't have the 2011 amended forms processed for 7-9 months from now. Each hold is only 9 weeks, so I need to place a reminder to myself to call and have the hold reapplied every 9 weeks.

Then, about a year from now, they will get around to the 2012 returns and amended forms, and the process will begin for that year and probably get resolved in 2015 or 2016.

If you have a letter from the IRS, please don't panic. Call them, take good notes (get the name and ID number of the representative). They have always been friendly and helpful. I don't know who sends out the letters, but it's not the same group of people that you get when you are on the phone with them.

That's my story. Hope it helps.

[Matt]

Thank you John for telling us about your experience. I am sorry that this has happened. However, your experience clearly illustrates why it is so critical that those who keep the books for churches be very knowledgeable on what the IRS laws are regarding wages, Social Security, Medicare, and Federal withholding taxes for churches, comply with these laws, and complete the forms correctly to begin with to prevent getting these types of letters. As I mentioned in the thread you refer to, the most authoritative guidance I have found on these matters is the Church and Clergy Tax Guide by Richard Hammar. It is well worth the expenditure to obtain this guide and read the chapter on Church Reporting Requirements. This chapter has two comprehensive examples, including filled in examples of how to properly fill out the W-2's, W-3's, and 941's. I have found it to be invaluable when it comes to these types of matters.

[F12Mahon]

We have an accountant do our 941's. Twice we've gotten nasty-grams because box four was unchecked. I was embarrassed because I missed it the second time. Whene I called the IRS they were pleasant to deal with.

Eugene

[BroDave]

Our church has had many, many letters from the IRS. Our accountant specializes in churches. He filed quarterly statements for us, and has since 1998. In about 2010,the IRS started sending letters requesting all four quarters to be re-sent, because we had not filed.
When we filed again, they sent another letter, saying we were required to file annually, not quarterly, and they would not process the quarterlies. We then filed an annual return, which they refused to process, because we were required to file quarterly. It became a repetitive cycle.
This has been going on ever since, with each additional year just adding to the problem.
We have tried sending the returns by registered mail, which they had to sign for, and they still claim they never received it. We called, and even hired a tax advocate, but it hasn't helped.
I don't know what to do, or how to solve this issue, but I'm wondering if we are the only church experiencing this.

[NeilZ]

Our church has had many, many letters from the IRS. Our accountant specializes in churches. He filed quarterly statements for us, and has since 1998. In about 2010,the IRS started sending letters requesting all four quarters to be re-sent, because we had not filed.
When we filed again, they sent another letter, saying we were required to file annually, not quarterly, and they would not process the quarterlies. We then filed an annual return, which they refused to process, because we were required to file quarterly. It became a repetitive cycle.
This has been going on ever since, with each additional year just adding to the problem.
We have tried sending the returns by registered mail, which they had to sign for, and they still claim they never received it. We called, and even hired a tax advocate, but it hasn't helped.
I don't know what to do, or how to solve this issue, but I'm wondering if we are the only church experiencing this.

We have had issues with the IRS. What has worked for us is:

1. We file all our monthly payments online through EFTPS
2. We file our 941s out of Powerchurch. All the data is there, and it creates the form for us.
3. We contacted the IRS and demanded to talk to a supervisor as we tried talking to one of the standard customer service persons, never got satisfaction.

[BroDave]

BroDave wrote:
Our church has had many, many letters from the IRS. Our accountant specializes in churches. He filed quarterly statements for us, and has since 1998. In about 2010,the IRS started sending letters requesting all four quarters to be re-sent, because we had not filed.
When we filed again, they sent another letter, saying we were required to file annually, not quarterly, and they would not process the quarterlies. We then filed an annual return, which they refused to process, because we were required to file quarterly. It became a repetitive cycle.
Niel:
1. We file all our monthly payments online through EFTPS
2. We file our 941s out of Powerchurch. All the data is there, and it creates the form for us.
3. We contacted the IRS and demanded to talk to a supervisor as we tried talking to one of the standard customer service persons, never got satisfaction.

Brodave:
1. We don't have any employees, so we don't pay tax. Our pastor files as self-employed, and we reimburse him for socsec tax.
2. I am new to Powerchurch, but I have been talking to the pastor about doing our own tax forms, but haven't had the opportunity to learn how yet.
3. I'm told our accountant has spoken to IRS supervisors frequently, but they claim we are sending the forms to the wrong address. I have saved copies of most of our returns, and I mail the forms back to them in their own reply envelope, so I don't see how they could be going to the wrong address.

[NeilZ]

Brodave:
1. We don't have any employees, so we don't pay tax. Our pastor files as self-employed, and we reimburse him for socsec tax.
2. I am new to Powerchurch, but I have been talking to the pastor about doing our own tax forms, but haven't had the opportunity to learn how yet.
3. I'm told our accountant has spoken to IRS supervisors frequently, but they claim we are sending the forms to the wrong address. I have saved copies of most of our returns, and I mail the forms back to them in their own reply envelope, so I don't see how they could be going to the wrong address.

Dave,

since this thread was about the IRS form 941, and payroll, I don't think that your issue falls under this thread. You're having problems with the Non-Profit Corporation tax returns. There is nothing in Powerchurch that does anything with those forms.