Church Reimburses Expenses Only (No compensation)

Question:

Do churches and Christian organizations that provide only reimbursement for expenses incurred (and no salary) need to report these expenses on either Form W-2 or 1099-MISC?

Answer:

Expenditures reimbursed to an employee under an accountable plan are not reported on Form W-2 or 1099-MISC. However, the organization must be sure that the reimbursements are of the non-taxable type. According to IRS Publication 463,

“To be an accountable plan, your employer's reimbursement … arrangement must include all of the following rules.

1. Your expenses must have a business connection — that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

2. You must adequately account to your employer for these expenses within a reasonable period of time.

3. You must return any excess reimbursement or allowance within a reasonable period of time.”

Of course, the minister’s cash compensation, if any, must be reported on Form W-2.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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