Creating an Accountable Reimbursement Plan

Only at tax time do many ministers find out that their “accountable reimbursement plan” is not really “accountable” under the rules of the IRS. Included here is an excerpt from theChurch Treasurers’ Manual, available at without charge, which should be helpful in creating a valid “accountable” plan:

The church governing body (Church Council or the church as a whole operating in a business meeting) should adopt a resolution creating an accountable reimbursement plan. The resolution could be very simple, for example:

“The Anytown Church of God, through this action of the Church Council, does hereby create an accountable reimbursement plan for Pastor Phil Pulpit. In addition to the compensation paid to Pastor Pulpit, the church agrees to reimburse all necessary and proper business expenses incurred by him during the normal course of conducting business on behalf of the Anytown Church of God up to an amount not to exceed $6,000 a year. Expenses must be substantiated to the church treasurer as to the date, amount, and purpose within 30 days after they are incurred. Any excess reimbursement must be refunded to the church within 60 days after expenses are paid or incurred. This resolution shall be good and valid for the upcoming fiscal year and all years afterward unless changed by this body.”

It is the responsibility of the church treasurer to make sure that this resolution is reviewed and examined each year. However, the last sentence of the resolution keeps such active in case the church fails to place a new resolution in the records.

Disbursement of the “expense” money can be made on a regular basis, either in advance or upon submission of the receipts. If expenses are paid upon submission of expense receipts, there is no problem of “excess” expenses that has to be returned at year-end. However, many ministers would rather receive their “expense” money in advance so that they do not have to use their personal funds to “float” the expenses of the church for a month or so. Advancing expenses is perfectly fine. However, the minister still must provide receipts to the church treasurer. While the IRS regulations require that receipts must be submitted within 60 days of incurring the expense, the church can demand that receipts be submitted more often – say every 30 days (or by the first of the month). A shorter time period generally helps assure that proper receipts are presented. The Accountable Reimbursement Plan Ministry Related Expense Form can be used by the minister to submit his expenses to the church treasurer, whether he is getting payment in advance or if he is receiving payment upon receipt of proper documentation.

The minister should maintain a detailed log of all mileage traveled for business purposes. The log should be used to calculate the mileage claimed on the Accountable Reimbursement Plan Ministry Related Expense Form. In addition, the minister should save the logs for at least seven years to respond to any inquiry that might be raised by the Internal Revenue Service.

The church should not use a salary reduction arrangement to pay for the minister’s business expenses. Under this type of plan, the minister’s “salary” check would be reduced weekly or monthly by the amount of expenses he submitted. Such arrangement is nonaccountable and any “reimbursement” must be counted as income to the minister.

** Please refer to the Tax Information Manual on our website for more information concerning these topics.


About benefitsboard

Art Rhodes is the President and CEO of the Church of God Benefits Board, Inc. - the administrator of the Ministers' Retirement Plan and the Church Loan Fund, Inc. The corporate offices of the Benefits Board are in Cleveland, TN.
This entry was posted in 03 - March 2015, Expenses, Informational Manuals, Internal Revenue Service, Ministers, Pay Roll Taxes, Tax Information. Bookmark the permalink.

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