How to Establish a Written Accountable Reimbursement Plan

Question:

Our church would like to set in place an accountable minister's expense reimbursement plan to reimburse our pastor for any professional expenses he incurs. What needs to be done establish an accountable plan?

Answer:

Under accountable plans, eligible ministry expenses reimbursed to employees are not taxable as income. To establish an accountable plan an employer must follow three rules. For a more extensive discussion of these rules and guidelines see our previous blog post linked below. 

    1) The expenses must be business related.
    2) The expenses must be substantiated in a reasonable period.
    3) The employee must return any excess reimbursement or allowance to the employer.

Following these rules is enough to establish an accountable plan. However, while there is no requirement to have the plan in writing it may be wise to create a written plan to ensure that the guidelines and rules are followed. A recent article (Feb 2020) in the AICPA's Journal of Accountancy suggests that a written plan include the following items. 

• Types of expenses that are reimbursable.
• The time period for employees to submit expenses.
• The process for requesting reimbursement (what documents are needed, etc.).
• Any preferred suppliers.
• The maximum allowable amount for certain expenses.
• The process for returning excess reimbursements or allowances.

Once a written plan is set in place it should be made available to employees using the accountable plan and carefully followed to ensure compliance.

For more information on Accountable Reimbursement Plans see... 

        Accountable vs. Nonaccountable Professional Expense Reimbursement Plans