Wednesday, November 12, 2008

Want help cheating on your taxes, Rabbi?

Abramoff, Agriprocessors, Boesky...

I join in the dismay and outrage and embarrassed על חטא- klopping every time a Jew is indicted for improper business practices and immoral activity. Yesterday I heard about another case, and again went through the recriminations.

That said, I must add two caveats from personal experience:

1) The rationalizations for financial impropriety are often very tempting, and

2) Rabbis are sometimes involved in it, without even knowing they are doing anything illicit.

One particular case, from my own experience, comes to mind:

A while back I officiated at a funeral for an unaffiliated family. They made all of their arrangements with a local funeral home, and the funeral director was to pay me for my services.

(Disclaimer: As a general rule I don’t charge for funerals, or other services; people want to do things right, they need a rabbi, so how could I make that difficult for them? Bar Mitzvah training, weddings, funerals, I decline payment. But if people offer payment anyway, then I accept it.)

So the funeral director came to write me a check. He pointed out that this check, in tandem with other checks he might write to me for other funerals during the year, could trigger a 1099 form, so that I would have to pay taxes. Being a nice guy, he asked if he could write the check to my Benevolent Fund, so that I could take the money through the Fund, and avoid having to pay taxes on it.

I’m no tax lawyer, but I believe there is a term for this sort of activity: It’s called money-laundering, sending money from A to B via a third party to avoid paying taxes on it. As I understand the law, it’s just as illegal as claiming a charitable deduction for paying yeshiva tuition.

The offer was tempting:

1) I shouldn’t really have a 1099, since I am not really a contractor of the funeral home. I’m the family’s contractor. The funeral home is only cutting the check because the family gave them the money as a third party. The problem is that the payment is on the funeral director's books, which triggers the 1099.

2) It’s not clear how to classify an honorarium given for funeral services, in the first place.

3) I already pay a ridiculous amount in taxes, because clergy have to pay self-employment tax.

4) I give a lot to help others, financially and otherwise (see a good Orthonomics post on this point, here).

5) And, as, the funeral director took pains to tell me: Everybody does it.

As I said above, the justifications and rationalizations for unethical activity are tempting... but I declined.

My point is not to say, "Torczyner is wonderful." I'm not wonderful; I'm just someone who was raised to be honest.

Rather, my points are these:
1) If we expect our community to act ethically, we - and especially rabbis - had better be ready to act ethically, ourselves; and
2) This applies even to the justifiable cases. In reality, all of them are "justifiable" cases, or at least look like it at the time.

False deductions, funnelling money through a Benevolent Fund, accepting payment in cash, hiring a nanny off the books, these are just as illegal as the crimes committed by Agriprocessors in the scandal du jour.

קשוט עצמך ואחר כך קשוט אחרים, the gemara says, with a sharp play on words: קישוטים are ornaments, but קושטא is truth. Ornament yourself before you ornament others, and make sure you are telling the truth before you insist that others do the same.


  1. if you were willing to not take payment, why not just have it donated to your benevolent fund and use it as the fund is intended.

  2. Thanks for your comment.

    I do that from time to time; it all depends on where I see the needs at that point in time.

  3. Gee, and just when I though everyone was corrupt. I'm glad you're following the 5th book of the Shulchan Aruch.

  4. I think the reference to Abramoff was very apt. He gave roughly 50% of his income to tzedakah. As he has come to realize, that doesn't make the activity ethically or legally acceptable.

  5. Neil - Thanks!

    Ahuva - I hope he has come to realize it. And I hope others come to realize it before they face charges.

  6. When I announced to my parents that I was becoming religious, my father blew up. "My daughter isn't going to be a goniff!" He, the CPA, boomed. He started his career auditing businesses and every business run by the Orthodox was crooked.

  7. Muse-
    Oy; reminds me of Pennsylvania Governor Ed Rendell's line, quoting his father. It was something along the lines of "The guys who sit in the synagogue longest on Saturday are the biggest crooks from Sunday to Friday."
    I got into a big fight with him over that line.

  8. True that we rabbis have to pay SE tax; but we get a lot back on the parsonage exemption.

  9. AnonRabbi-
    I would consider parsonage more of an exemption if we didn't have to pay self-employment tax on it.

  10. My understanding, from people who know him, is that he is truly repentant for his actions.

    I wish more people would take his example as a warning. Nothing is worth the kind of price his family is now paying.

  11. Neil- I think the point is that these are issues that are found in the existing four books of the SA.

    Rabbi- do you have to pay more than half on just the exemption that you take from parsonage?

  12. That self-employment tax is so harsh. I guess we're supposed to believe it's our social security. For sure we'll see it one day.

  13. I just wish my daughter's school would spend time teaching her laws related to business/monetary ethics, instead of making her memorize, for example, all of the various parameters of netilat yadaim down to the centimeter, or all the zmanim for mincha, which she barely understands anyway.

  14. I am proud to be even remotely associated with you. (We're both Jews, right?)

    20+ years ago I worked part-time as a baal magiah and sofer stam. In keeping with how I was educated, I went to register with the authorities in Israel as an independant business. Nearly everyone (except my hevruta who worked with me) said I was crazy; even the guy I used as an accountant. The accountant pointed out that we earned so little, it would cost almost as much just to legally run the business. I was horribly disappointed by how people looked at this. My hevruta and I stuck to our guns. We were out of business in any regular way within two years; but we weren't sorry.

    A rav I worked with here in the states said he left Israel when he did because everyone he knew in yehsivah was making a living on the 'gray market'. He wasn't willing to skirt the parameters of legality that way, so he came back to the states. A sad commentary on many things, but he had it right on the topic of integrity.

  15. Jeremy-
    I do what Turbotax tells me to do, but as far as I understand it, I'm paying the self-employment tax as well as state and local taxes on parsonage. Does that answer the question? To be more specific I'd have to go back and look at my 1040.

    Oh, come on; Yes We Can, right? The new administration will make everything right, and even bring back the Gorian Social Security lockbox.

    I'd like both, actually. I'm greedy.

    And I am proud to be associated with you, as well. Each of us makes a difference, I hope.

  16. A link to this will be up within the next 15 minutes.

  17. muse-I once saw a tax form prepared by a 'frum' CPA who took the liberty of cheating for the client without asking.

  18. Thanks for this post.

    Our chief Rabbi here in Modi'in, Rabbi Lau (son of the former Chief rabbi of Israel) said that when he conducts a wedding he asks the Eidim whether they could look him in the eye and tell him honestly that they do not cheat on their taxes.

    I'd be interested how many people who has invalidadted for eidut that way

  19. Wow, Michael - that does sound like an interesting moment under the chuppah.

    Perhaps it could really go into the pre-wedding vetting: "Please make sure your witnesses are shomer mitzvot, including yashrut..."