Church and Ministry Q&A – Focus on Expense Reimbursements
Mark Helland, C.P.A.

Mark Helland, CPA is a partner with the public accounting firm Elliott, Dozier and Helland, PC which is located in Tulsa, Oklahoma. Mark’s practice focuses on the unique needs of non-profits and he specializes in outsourced accounting, compliance and tax related issues for church and ministry clients across the United States. For further assistance from Mark on these services, Mark can be contacted via email at mark@edhcpa.com or by phone at (918) 627-2286. You can also connect with Elliott, Dozier and Helland and get updates via social media at Facebook.com/hellandcpa, Linkedin.com/in/hellandcpa and Twitter.com/hellandcpa.

How do I get reimbursed when I personally pay for a church expense? 

The first step is to make sure that your church board has adopted an IRS acceptable accountable reimbursement plan. There are specific guidelines that the IRS expects organizations to follow when reimbursing employees for out of pocket expenses. If these guidelines are not followed, then the reimbursements would in effect be considered taxable W-2 income to the employee. Having your board approve an accountable reimbursement policy will provide your organization with the guidelines to follow in reimbursing business related expenses. For example, an accountable reimbursement policy normally stipulates certain parameters such as a maximum number of days after an expense is incurred that an individual can submit a receipt for reimbursement. The accountable plan also must define the rules for substantiation of expenses for which an employee is requesting reimbursement – i.e. receipts or notes that document the nature of the expense.

Can I pay my housing expenses and other personal expenses directly from a church or ministry bank account?

Only if you want to lose your church or ministry’s tax exempt status and pay huge amounts of back tax, interest and penalties to the IRS. Using non-profit funds is never an acceptable route to take in paying housing or any other personal expenses. These types of expenses would not fall under the accountable reimbursement plan, mentioned above as they are not valid church or ministry business expenses but are instead personal in nature. It is critically important to maintain separate accounts, as your personal expenses should not be mixed in with the funds of a 501c3 organization. As mentioned in many previous articles, a board approved salary and housing allowance is the way to pay yourself from the church or ministry and then use these funds within your personal bank account to pay your own expenses.

I have taken someone out to eat for my ministry. What is the appropriate way to document the event?

Meals are a major item where we see problems in our audit work. While it is completely acceptable to take guest speakers, congregation members or staff out to eat, documentation is critical. Make sure that the meal receipt includes the date, the amount, and the name of the restaurant – obtaining the detail bill for the meal in addition to the charge slip is also a good idea. Most importantly, make sure to write on the receipt the names of the people involved and the business purpose for the meeting as well.

Can I use the church’s debit, credit or gas card to buy gas for my vehicle?

No, this is not an IRS approved way to pay for fuel and travel costs and this is a very dangerous practice. Providing gas cards to church or ministry employees is extremely dangerous and is literally asking for fraud to occur. Ministry employees should not be allowed to use a gas card to fuel a personal vehicle as it is impossible to determine what portion of a tank of gas was used for ministry trips as opposed to personal trips. Additionally, this practice violates all IRS requirements for accountable reimbursement plans. Employees who drive their vehicles for business purposes should instead submit a request for reimbursement with a detailed listing of mileage driven, including the locations driven to, business purposes and mileage amounts. More to come on this tricky area in future articles…

 

This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is shared with the understanding that neither the author nor Tony Cooke Ministries is engaged in rendering legal, accounting, psychological, medical or other professional services. Laws and regulations are continually changing, and can vary according to location and time. No representation is made that the information herein is applicable for all locations and times. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

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