Disallowed Housing Allowance
Our church had an audit completed last year due to the embezzlement of funds.
During the audit, it was discovered that the Pastor had directed the former financial secretary to claim a housing allowance for half of his salary without proper approval.
The audit noted that the appropriate resolution was not provided nor any information substantiating the Pastor's housing expenses.
The audit also discovered several 1099s that were not paid to persons that received over $600 from the church.
The church filed corrected W-2s disallowing the housing allowance and the 1099s based on the recommendation of the auditors.
The pastor has now come back and asked the church to assist with payment of the additional taxes. He currently remains the pastor.
Is the church liable for the additional tax? Can the church legally pay his taxes? If the church does pay, wouldn't it be considered income and he'd have to pay additional taxes on the funds provided by the church?
Would we also be liable to pay the taxes for persons that received the 1099s?