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Form W-2 and a Pastor's Auto Allowance

An auto allowance advanced by a church to its pastor is subject to very exacting accountable plan rules. See my explanation on my website at MinistryCPA.org under Minister and Ministry Tax, Top 10 Questions #4.

The church must receive timely evidence of the pastor's business mileage when it offers advances. Generally, I recommend that a church reimburse its pastor for business use of his personal automobile (at the current IRS rate) only after documentation is received.

Under accountable plan rules, when auto allowance advances exceed the allowable deduction (qualified miles times the current IRS rate) the pastor is required to refund the excess advance to the church. Otherwise, the arrangement is disqualified and the entire annual allowance should be included in Box 1 of the pastor's Form W-2.

Simply including the excess amount in Box 1 is not in compliance with provisions of the Internal Revenue Code.

Comments

  1. Corey...great blog site!

    I am a church administrator in La Crosse (WI) and am having a hard time finding an answer to my question about pastors w-2's and Roth 401(k) plans.

    With traditional plans, we simply reduce Box 1 by the amount of the deferral.

    For all the nuances with pastoral income and taxes, is it as simple as NOT reducing Box 1 by the amount of any ROTH deferral?

    I find that many churches are not offering the ROTH for their 403 or 401, so I have exhausted my network of answers in this area.

    Thanks for any insight you may have!

    Mark
    Bethany Evangelical Free Church

    ReplyDelete

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