Employee Business Expense Reimbursements--Taxable?

Question:

A church has a policy that its pastors who accompany short-term missions trips by its members will be provided 100 percent of their travel expenses out of church funds. Are these payments reportable as taxable income to the minister?

Answer:

Travel and other ordinary and necessary expenses paid on behalf of an employee to conduct his or her employer's business are not considered taxable income to the employee (IRS Publication 463). This rule applies to ministers traveling on missions trips sponsored by a church.

If the employee is provided an advance of these funds, then the employee must comply with IRS substantiation requirements (Pub. 463 (2/4/2009), page 29), the most pertinent stipulation being that adequate documentation must be provided to the employer by the employee within 60 days of using advanced funds for business purposes.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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