Accountable reimbursement plan vs. church credit card

by Jeff
(Fayetteville, NC)

If each pastor has a credit card in the church's name that is paid for by the church, to be used for church/ministry expenses, is there any reason to also have a separate accountable reimbursement plan?

Other than reimbursing mileage, what expenses would go against this plan instead of going on the credit card?

We originally had an accountable reimbursement plan, and now have a church credit cards, and the two plans/processes seem redundant.

Furthermore, there seems to be no clear cut delineation as to which expenses should go to which process. Any clarification would be appreciated

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Accountable Reimbursement Policies NOT just for employees
by: Vickey

Accountable Reimbursement policies(ARP) do not just protect your employees...it protects your "volunteers" as well.

You need an ARP to protect your church, employees, and even church members that volunteer to pick up something to be reimbursed for later ... from adverse tax consequences.

Using the church credit card (make sure you have a credit card policy in place) will work for most things, but as you mentioned....reimbursing your employees and volunteers for such things as mileage and "travel" meals (per diem meals) should be done through an ARP.

Side Note: NEVER fill up a person's "personal" gas tank with a church credit card. Use the mileage method.

Also, you would need an ARP if you "reimburse" the Pastors for use of their personal cell phones for church business.

Maybe some other church administrators can add some more instances where an ARP would be useful.

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No Funds for Pastor's Expense Reimbursements

How to write a statement or resolution when church has no funds to reimburse Pastor's expenses? I search you site and found nothing addressing the issue. I await your response. Thank you!

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Include Wording in AR plan to Cover Organization and Employee
by: Vickey

You should include wording in your accountable reimbursement arrangement that would allow your minister/staff to claim unreimbursed expenses on their personal taxes IF the church could not afford to reimburse those expenses.

I read an article on StartChurch many years ago on this very issue. See more details on that article on my AR Tips page.

In a nutshell, a taxpayer is not entitled to take a tax deduction for unreimbursed businesses expenses if the employer has a reimbursement policy.

So your accountable reimbursement policies should include wording that would require the church to send a written reply to the requesting employee recognizing their claim as legitimate but also denying it according to its reimbursement policy on the basis that it cannot afford to issue the reimbursement.

I too very much appreciate all of Sandi's contributions to this site! I thank God for you:)
new church
by: Sandi

Congradulations and prayers for your new church!!
This site is a blessing! (Thanking God so much for Vicki!)
I suggest you order hard copies of IRS pubs:
1828- Tax Guide for Churches and Religious Organizations
the 15 series
Publ 525 - Taxable and Nontaxable Income
Publ 517 - Social Security and Other Information for Members of the Clergy and Religious Workers
Publ 463 - Travel, Entertainment, Gift, and Car Expenses
Pub 4221-PC - Compliance Guide for 501(c)(3) Public Charities
Publ 598 - Tax on Unrelated Business Income of Exempt Organizations
Publ 526 - Charitable Contributions
These are avail. online but it is good to have for the council and church members to be able to see where you are getting the info from :-)
I also suggest you give your pastor this site as Vicki has ton's of info for pastors too!
Make sure you get policies in place for everything you do as IRS requires churches to follow the 501 rules even if they don't get the "official" exempt certificate (Vicki also has tons on policies)
May God bless your new outreach!
Prayers
No No Funds for Pastor's Expense Reimbusement (s)
by: Anonymous

Thank you Sandi. I will read IRS' resources. Our church is just starting. I am trusting that any other questions our church may have on this subject will be answered after reading the IRS' pubs.

This site has been a blessing to us, from Therese, all of you. And Sandi, I receive the encourgement of prayer you have so graciously offered. I wish you well!
not reimbursed
by: Sandi

Please look at IRS Pub 463

IF: you have an accountable plan but the employee does not take advantage of it with you
THEN: they can not claim it on their own.

IF: the church does not reimburse them because there are no funds
THEN: they can claim it on their own (they have all the documentation, not the church, as the church did not, can not, or will not reimburse them)

IF: the church uses an non-acountable plan
THAN: all payments are income (box 1 W-2)

There are many rules on what is allowed. IRS Publication 15 (Circular E) is a good start and covers what employers are responsible for.

I have not found anything stating the employer has to give a statement to the employee, except what plan they are using
" Your employer should tell you what method of reimbursement is used and what records you must provide"

SO:... you might want to document in the minutes that "no funds are available for reimbursements at this time" and they could keep a copy of that in their file...

Hope this helps
Prayers
Pastor's Expense
by: Anonymous

What is the church has an Reimbursement Account (RA). Just recently, I came across information. This year (2012), the IRS disallowed the expenses because a church had an RA in place, but I cannot find the article discussing this topic. Could someone help with the statement/resolution? What should the church include so that the pastor can then get his expenses allowed when he files? (not through the church). I would appreciate any and all assistance.
reimbursments
by: Sandi

Reimbursements are a benefit and do not have to be given.
Pastors are usually dual status (employee of church and also self employed) so anything the church does not reimburse they would be able to claim on their own tax forms.
I have not heard of the church needing to give any statements to that effect, the pastor would have the receipts and any other supporting documents for his own claims.

Hope this helps,
Prayers

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Mileage from home to work.

by Greg
(Bolivar, MO. 65613)

Do Not reimburse your minister for travel back and forth from his home to the church (it is considered commuting miles).

What if the minister's office is in his home rather than the church? Does this qualify him to receive mileage from home to church?

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Office in your Home
by: Vickey

According to IRS Topic 514:

"Although commuting costs aren't deductible, some local transportation expenses are. Deductible local transportation expenses include the ordinary and necessary expenses of going from one workplace (away from the residence) to another. If you have an office in your home that you use as your principal place of business for your employer, you may deduct the cost of traveling between your home office and work places associated with your employment."

It is considered a legitimate business expense "if you have an office in your home that you use as your principal place of business". If that applies...it boils down to what your church's accountable reimbursement plan allows =)

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Is there a list of business reimbursements that are qualified to reimburse and a list that is not?

by Karen Mercer
(Illinois)

I work for a church, is there a list of business reimbursements that qualify to be reimbursed and a list that do not qualify?

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New Tax Law
by: Anonymous

Does this list comply with the new tax law.
List of Qualified Accountable Reimbursements
by: Vickey

The following are examples of reimbursable expenses:

Education – Tuition, fees, books, supplies, and (if the school is away from the pastor’s home area) transportation, meals, and lodging are reimbursable. Education expenses which qualify your pastor for a new trade or business (such as carpentry, etc.) are not reimbursable.

Meal & Entertainment – Reimburse a pastor 100% of his cost for meals and entertainment. When his spouse is present because the spouse of the person being entertained is present, her meal is reimbursable. The cost of meals for the pastor’s children are never deductible.

Mileage – The pastor should keep a log of his miles (including the mileage at the beginning and end of each year) and be reimbursed for his business miles at the standard mileage rate.

Travel – The cost of train, airplane, boat, bus fare, auto rental, taxi, hotel, motel, meals, gratuities, telephone, travel insurance, baggage charges, cleaning, and laundry costs are reimbursable when a pastor travels on business. A pastor might travel to attend a church convention, a speaking engagement, to lecture, to perform a wedding or a funeral, to provide pulpit supply, an evangelistic meeting, on deputation, to church camp, etc.

Excerpt from the Stewardship Foundation website which is an EXCELLENT resource for questions like this!

See http://ssfoundation.net/pastors/faq/ page for a list of things that are NOT reimbursable:

http://ssfoundation.net/pastors/faq/

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Reimbursing meals under TCJA

by Irma
(Nashville, NC)

TCJA says that meals are only 50% deductible.

Can I still reimburse my pastor under an accountable reimbursement plan for 100% of his meal expense or is 50% deductible and 50% to be reported as taxable income.

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Meals Can be Reimbursed 100% if....
by: Vickey

Meals (including travel meals and entertainment) can be fully reimbursed or expensed if...

1. the church or organization has an accountable plan properly set up and maintained. (click the [Join in and ... Simply click here to return to AR Plan] link at the bottom of this page)

2. the meal was for "business/church" purposes!

For example, your Pastor meets the Director of a local nonprofit organization for a meal at a local restaurant to discuss how they can work together to help the community.

That meal can be charged to the church's credit card OR your Pastor can follow the written guidelines of your approved AR Plan and be fully reimbursed for the meal he paid for.

HOWEVER...the new tax laws in the Tax Cuts and Jobs Act (TCJA) will probably affect how or IF a minister can claim meals and other related business/church unreimbursed expenses on their personal tax return... SO it is now more important than ever to have an Accountable Plan/Policy properly set up and maintained!

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Gas Allowance

by Jan
(Texas)

Our church has a charge account at one of the local gas stations. Pastor and staff is able to charge gas and the church is billed monthly for the gas purchases. Is this an allowable expense?

Know the answer? Face the same situation? Please post your answer or comment by using the "comment" link below. Thank you!

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pastor's gas allowance
by: Anonymous

My husband is a pastor, and our church has this type of gas allowance for him. We charge the gas at the convenience store which bills the church.
We received our W-2 from the church and this amount is not included. Is it possible to claim this amount somewhere else, such as line 21 of form 1040?
Gas Allowance
by: Jan (Texas)

Thanks, Donna. From the time since I posted the question, I attended a church tax compliance conference and found out that gas is not an allowable expense. The correct way is to reimburse mileage through the accountable reimbursement plan.
gas/mileage payment
by: Donna

From what I have read, a gas allowance is fully taxable to him/her as income. They may deduct, as a miscellaneous itemized deduction, their vehicle expenses or mileage. However, those deductions can only be taken for the amount that exceeds 2% of the adjusted gross income. Additionally, if he/she does not itemize they lose the whole deduction, but still has income. This is referred to as a non-accountable plan.

Under an accountable plan, they would submit mileage logs and expense reports to the church,
who would reimburse them at the current IRS rate for mileage. This is an accountable plan and
the payments to them are not taxable, and the mileage/expenses are not deductible by the pastor.

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Possession of Reimbursement

by Brian
(Ohio)

If a church reimburses a pastor for the purchase of a computer or any other church related technological device, does that make the computer property of the pastor or the church?

Thanks for your response.

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Church Property
by: Vickey

If the church paid or reimbursed for...the computer or any other "asset"...it belongs to the church.

If it is a "gift" for the minister...it's taxable income =)

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