Tithing is not necessary expense.

• Author: Beavers, James A.

The Tax Court upheld the IRS's determination that a taxpayer's tithing payments to his church were conditional expenses for purposes of determining the amount of the taxpayer's monthly payments under a partial payment installment agreement.

Background

George Thompson, a resident of New Jersey, is the president of Compliance Innovations Inc. In addition, Thompson has been a member of the same church his entire life and has regularly contributed 10% of his monthly income to the church. He is actively involved in the church and holds a position as a shift coordinator in his local congregation. Additionally, Thompson is a stake Scouting coordinator for the church and is responsible for overseeing six Scout troops in different congregations in New Jersey. The church does not compensate Thompson for his work.

On Jan. 7, 2008, the IRS assessed trust fund recovery penalties under Sec. 6672 against Thompson for employment tax liabilities owed by Compliance Innovations Inc., of approximately $151,000 for the periods ending Dec. 31, 2004; June 30 and Sept. 30, 2005; and June 30, 2007 (CDP period tax penalties). The IRS later filed a federal tax lien with respect to his unpaid CDP period tax penalties. Thompson requested a collection due process (CDP) hearing, in which he did not contest the amounts of the underlying CDP period tax penalties.

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The IRS had also previously assessed trust fund recovery penalties against Thompson for employment tax liabilities owed by Compliance Innovations Inc., for the periods ending Dec. 31, 1999, June 30, 2000, and Sept. 30, 2000, and personal income tax liabilities for the tax years 1992, 1995, 1996, 1999, and 2000, which remained unpaid (non-GDP period tax liabilities and penalties). Thompson had entered into a partial payment installment agreement with the IRS in 2006, for payment of the non-CDP period tax liabilities and penalties, but had defaulted on it, and as of Aug. 1, 2008, he still owed approximately $731,000 of them.

In September 2008, Thompson requested a partial payment installment agreement that would encompass all of his tax liabilities and penalties for the CDP and non-CDP periods. The IRS requested that Thompson submit a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. Thompson's Form 433-A reported that he had a monthly income of $27,633 and monthly expenses of $24,416. The total monthly expenses included church tithing payments of...