Three Ways the IRS Uses Your Church’s Social Media

By Raul Rivera

In recent years, the IRS has relied on social media as a way to prove tax liability on taxpayers. 

In an article posted on Inc. Magazine, Kevin P. McQuillan, CPA said, "What we do know is that social media is almost certainly a part of how the IRS chooses which audits to do, because the inquiry seems to be laser-focused, and they know what to look for." 

I want to share with you three specific ways the IRS can use your church’s social media account as an enforcement tool. As part of our StartRIGHT Service, a thorough reading of the church’s website and social media accounts are made to ensure that everything in the application process is consistent with the church’s online presence.

Take precautions before posting

Social media is a very effective way for the church to stay in touch with the congregation. However, churches and ministers should take precautions when posting and avoid documenting compliance violations. It happens all too often that for lack of compliance knowledge, a wonderful moment can become a tool used against you or your church in an audit. Let’s look at three ways revenue agents can use church and personal social media to conduct audits.

1.  Selfies at a pastors’ conference

When Pastor Edwards (not his real name) went through an audit, the IRS requested a copy of his bank statements for the whole year. As they went through each of the deposits he made, they noticed that the church paid him a $78,000 salary, but he actually received a total of $86,000 from the church. 

The revenue agent asked for an explanation. The pastor said some of the extra money was from reimbursements for traveling to a conference he attended during the summer and the rest was for mileage reimbursements. Normally, under IRS rules, those types of reimbursements are perfectly fine. But in this case they were not allowed.

The revenue agent asked the pastor to submit to him expense receipts of the conference and mileage logs showing ministry use of his personal vehicle. The pastor went through all of his expense receipts and mileage logs to make sure all was in order. When the revenue agent examined the receipts for the conference, he determined that the church reimbursed him in the amount of $1,630.00 for the three-day conference.

Then came the big question followed by a statement. Was your spouse with you at the conference? Your social media account shows several selfies of you and your spouse at meals with other pastors. “Well, yes, she was with me,” said Pastor Edwards.

The problem, in this situation, was that the pastor’s wife was not employed at the church. This type of transaction is considered an excess benefit transaction subject to an excise tax penalty of up to 225%. According to IRS publication 463, a person’s spouse can be reimbursed for the travel if the spouse is:

1. An employee,
2. Has a bona fide business purpose for travel, and
3. Would otherwise be allowed to deduct the travel expenses.

Pastor Edward’s wife did not meet all three conditions. The IRS used the church’s social media account to determine that the $1,630.00 was not all reimbursable to him and assessed an excise tax. Selfies at a pastor’s conference was all that was needed to document an illegal act. 

2.  Poor mileage logs

Pastor Edwards would never take money from the church that was not honest. He knew he was not very good at keeping records. Every month, when it came time to submit his mileage reimbursements, he did his best to recall the church business use of his personal car so he could receive a reimbursement. He couldn’t always remember the exact dates that he traveled, but he did his best.

When the IRS compared his travel logs with his social media account, they noticed his information did not always add up. How was he at a little league baseball game and visiting Sister Luanne at the hospital at the same time? When questioned, he realized he recorded his logs in the wrong month. He knew his bottom line was right, but his memory of the actual events on the exact dates was off. Accuracy matters.

3.  Video testimony

Staff members from ABC Church take a short video and posted it to the church’s social media account. The video was a testimonial of a certain person saying “thank you” to the church for a love offering given in a time of great need.

The money was used to repair his car that was often used to pick up children for Kid’s Church. The individual was employed by the church as the children’s pastor and was paid $100 per week. When his car broke down, it put him in a tough situation because his secular job was about 15 miles each way and his car was the only way he could get there. The repair bill was $897.00 and the offering he received was $910.00. He was very thankful to the church and testified how God provided his needs through the congregation.

When he went through a correspondence audit, the IRS specifically asked about the love offering he referred to in the video.

ABC Church’s challenge is that they gave a “gift” to a needy member of the church, who also happened to be an employee and then they told the whole world about the generous donation he received by posting it on social media. 

The church assumed it was benevolence and did not report it as income on the his W-2. Section 102(c) of the Internal Revenue Code does not allow an exclusion from income tax any payment the church gives him because he is an employee of the church. This is true even if even if he is truly in need of benevolence. There are no exceptions to this section of the code. The audit would have gone well if the love offering was reported on his W-2.

Don’t be intimidated

There are times that I hesitate to post articles like this one because the potential exists for churches to react in manner that is opposite of the intention for the article. While examination of social media accounts are tools used by the IRS, it should never discourage churches and ministers from posting wonderful testimonies of the goodness of God. I simply encourage pastors and church leaders to consider what they post and screen them for compliance issues.

There is power in knowing that your church is in compliance with God and the laws of man. StartCHURCH can help you get there. We won’t just help you startRIGHT, we will also help you stayRIGHT. Call us today at 877-494-4655 to learn how we can serve you and your church.

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