Bob Stephenson, Director of Finance and Treasurer for the General Conference has some important new information on how ministers and volunteers can be reimbursed for ministry related expenses on a non-taxable basis.

Accountable Reimbursement Plans:  More Important Now Than Ever!

With the President’s signing of the “Tax Cuts and Jobs Act” on December 22, 2017, it is more important than ever for your church to reimburse the church’s expenses incurred by your employees (including pastors) using an accountable reimbursement plan.  This is because employees can no longer deduct such unreimbursed expenses on their personal income tax returns beginning with their 2018 tax return.

Expenses reimbursed under an accountable reimbursement plan are not taxable to your employees.  Expenses reimbursed on a nonaccountable basis are taxable income to your employees.  An accountable reimbursement requires that the expense being reimbursed must have a clear legitimate business purpose of the church.  The reimbursed expense must be adequately accounted for providing the business purpose, the date of the incurred expense, a description of the expense, and a receipt for all expenses of $75.00 or more.  Good internal control and policies of the church may require receipts for all expenses being reimbursed.  The expenses are to be reported and reimbursed within 60 days of when they are incurred.  Business mileage may be reimbursed at the IRS approved annual rate, which is 54.5 cents for 2018.  A properly prepared expense report form that is completed and submitted by your employees should capture all the required information as long as receipts are attached with the report.

Expenses must be clearly described and identified.  For instance, business travel mileage must not be reported in a “lump sum” type request such as 250 miles for January church travel.  Instead, the mileage should be reported by date and the business purpose of the travel provided.  For example, 20 miles on January 15 for hospital visitation of parishoners.

The return of any excess payments of expenses must be paid within a reasonable period of time.  A safe harbor for a reasonable time period is within 120 days.