Cannot a nonprofit 501c3 church "pay" its minister and employees?

Question

According to a statement in the IRS handbook, "inurement to insiders" is not allowed. How, then, is such a church able to pay its employees, including its minister?? Also in the same handbook it is stated that churches that fit the criteria of a 501c3 organization do not need to actually file for 501c3 status with the IRS. How then do they file their taxes and issue tax deductions legally??

Answer 1

When last I attended a church, it did not pay taxes and the ministers and employees did indeed get paid.  I am not sure how payroll taxes and things like unemployment and worker's compensation were handled.   Also, the bookstore attached to the church as part of its "ministry" did not pay sales tax.  

Answer 2

I have my own Non-Profit Charity Organization which I have filed for the 501(c)3.  I can have paid employees, but only so many.  I think it was like 8 at the most, I can not recall at the moment.  They are paid more or less as contract labor and therefore the Organization does not pay taxes on them.  It is up to the ones who get paid to pay taxes.  If you receive the Tax Exempt Status from the IRS, what ever you pay out, goes toward the non-profit, so no taxes are filed.  So, as I stated earlier, you can have employees, but only so many and it would be contract labor.  I also worked for a Agency that had the 5o1(c)3 tax exempt and they paid their employees as contract labor.

Answer 3

I was part of an organization and we had to file an application for 501c3 status with the state legislature, before we filed with the IRS. We never had cause to pay attorneys, or anyone else, because we were a volunteer organization. Our attorneys worked for free.

You ask a really good question and I might look up the answer, one of these days. At the moment, I got nothing.

Answer 4

The board of directors of a nonprofit cannot be paid. The staff can be. And the staff can be fired at any point by the board.

Call your local United Way and ask if they have a nonprofit support center or nonprofit support clinic, or if they know where the nearest one is. These are nonprofit organizations themselvs that provide information on the legalities of nonprofit business, and they can provide you with one-on-one help for a very small fee.