Church expense vs personal expense

by Willow

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I do the bookkeeping for our church and am unsure if we are correctly expensing certain items to the church.

For instance, the pastor and his wife will have church members to their house for dinner and will use the church debit card to purchase the food.

Or the pastor will purchase his lunch on the card while out running errands for a church function,

or the pastor will purchase himself a coffee with the church card while picking up donuts for small group Bible study time.

Where is the line for what is a legitimate church expense and what is personal choice and expense?

Comments for Church expense vs personal expense

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It's all ministry
by: Anonymous

As a pastor who makes very little actual salary, it's my opinion that all spending on anything to living expenses (except for any vacation or recreational spending) is ministry-related.
I am living in a parsonage so anything I buy related to my living there in the service of a congregation is a ministry expense.
The food that sustains myself and family is a ministry-related expense due to the fact that the ONLY reason for me to live here in this home and in this area at all is for the express and specific service as pastor of this church.
If I were not the pastor of this church I would be living elsewhere making a living with a salary far and above the meager pay offered to a small town, small church pastor.
No, I am not complaining at all. I love what I do and I love the people here but my expenses out to be met by the church while I am actively serving here since they do not want me to have any other job.
Youth Director Expenses
by: Neoma C

Our church has allowed a youth director to expense entertainment for the children - i.e. meals after church, snacks during rehearsals, movies with religious themes. Now she is paying for Roblox (?) gift cards and trying to call that entertainment. No, we do not have an Approved Expense Plan.
Church CC is the same as being reimbursed
by: Joseph

Yes, you still need an ARP in that case even though the church credit card is being used up front by the pastor. It is treated by the IRS the same as if the pastor pays with his own money and later gets reimbursed. I've read elsewhere that this is the way it works (don't have links handy but you can find them if you search).
Church Credit Cards
by: Lindsay

Hi, I am doing the accounting for a new church startup, and we are planning to have a credit card for the pastor for his business expenses.

This includes meals when he is meeting church members for counseling, or potential speakers, donors, or worship leaders. Since he isn't being "reimbursed", (he's paying for it directly with the church credit card), do we still need a Accountable Reimbursement plan?

I plan on requiring him to provide receipts and document the business purpose of each expenditure (at least for meals or other expenses that aren't obvious).

Any advice would be appreciated.
Pastor and Staff Expenses
by: MarcusNTexas

Responding to Willow's last comment......it would seem permissible for the pastor and wife to also charge their meals when paying for the meals of a guest or guests when church "business" is being discussed or when the guest / guests are involved in a church activity, such as speaking, singing or consulting; however, it needs to be understood that these should not be a regular (daily or even weekly) happenings.

It is possible to abuse such privileges. so appropriate care should be taken. It may even be the responsibility of the church treasurer / administrator to monitor these activities and have a conversation with the pastor or other staff member if it appears that the privilege is being abused. Even for volunteer treasurers ............. like me.
Pastor and Staff Expenses
by: Anonymous - MN

I handle the Staff credit cards in much the same way, ie receive the credit card statement, compare the receipts they have turned in and pay the credit card.

The receipts or the statement has a purpose of the expense and hope the IRS would be satisfied with included details.

The one expense that does concern me is Gas. How extensive do details need to be regarding the purchase of Gas to satisfy the IRS?
guest/visitor lunch on credit card
by: Willow

These comments have been very helpful. In regards to the meals on the church credit card for guest speakers and/or church visitors, is it just for the guest/visitor that is allowed by the IRS or can the pastor and his wife's meal be included as well? This of course means without it becoming taxable income to the pastor.
Pastor and Staff Expenses
by: MarcusNTexas

Our pastor (and other staff members with credit cards) sometimes uses the church's credit card for meals with other individuals when such meals involve meetings where church "business" is being discussed or where a guest speaker or singer is being provided with a meal.

The pastor (or other staff member) always provides the treasurer with a copy of the receipt and a notation of the business purpose of the meeting / meal.

As treasurer, I receive the credit card statement at the end of each month and compare the charge with the receipt that was turned in. To date (5+years) I have not rejected any of these charges.

I agree completely with Vickey that there should be a clear policy regarding such matters and if it appears that these charges are excessive and "over the line" then the treasurer should meet with the pastor to express her / his concerns.
Taxable income can be created
by: Bill OConnell

Clergy should be reminded from time to time that when they fail to comply with the requirements of an Accountable Plan, they are creating taxable income for themselves. And they are also putting the church at risk with the IRS.

On examination of their personal tax return by the IRS, a taxpayer/clergy may be asked to demonstrate compliance with an Accountable Plan. If they fail that examination, all non-compliant payments will be deemed to be taxable income.

OUCH! Additional taxes and penalties will be assessed.

This extends to poor documentation, as well as untimely submission (more than 60 days after incurring the expense).

The church also is exposed when this takes place. The church will be deemed to have under-reported the taxable income of the individual, creating an opportunity for IRS to assess penalties for improper payroll reporting.

Bill OConnell CPA
Church expense vs personal expense
by: Anonymous - MN

I sure appreciate Vicky's response and the details she included. Everything that I have read from Hammer and others confirm what she has suggested.

My difficulty is that often Pastors are not inclined to provide me with the information that is suggested we need to reimburse these type of expenses. I am not sure they feel above needing to provide the details or just do not want to be bothered yet still expect their reimbursement.

I don't see a lot of reimbursement request but I have not been successful in getting a really valid process used by our Staff.
Must Have an ARP!
by: Vickey

This is an interesting discussion. I don't think there is a black and white answer.

There is a fine line to walk between personal and business expenses when it comes to the Pastor's expenses.

I will just add a few cautions here with this topic...

You MUST set up and maintain a proper Accountable Reimbursement plan/policy to be able to legally reimburse your pastor and staff for legitimate business expenses.

I highly recommend purchasing the Church Accounting Package which includes an ebook on Accountable Reimbursement plans.

Another thing to keep in mind is that your Pastor needs to keep very strict documentation on these "close to the personal line" expenses.

Tell him to turn over the receipt on the dinner fixings and document who it was for and for what "business" church purpose it served.

On his personal lunch, you would need to detail in your Accountable Reimbursement policy exactly when and with what circumstances the church can pay for his meal.

Refer to IRS Pub 463 for the guidelines on reimbursing those types of expenses. As someone stated on this post, the same rules apply to nonprofits as for-profits when it comes to reimbursing or paying up front ...your employees' "business" expenses.

Just running around locally doing church business would not (in most cases) justify paying for a staff member's lunch.

If he was buying coffee for all of the Bible Study group...that would be a "church" expense...but not for just himself.

Again ... stressing the importance of having a proper Accountable Reimbursement Plan in place!
Pastor salary, expenses benefits
by: Anonymous

Other way to do it is just have the pastor to keep track of all his expenses when he goes out and runs errands for the church, that way he could deduct all those expenses when he does his personal taxes as a minister.
not the point
by: Willow

While I appreciate you giving a response, I'm not looking for what is "fair" or what "everyone else does", I'm looking for what is legal.

As the person who does the bookkeeping I feel it is my responsibility to make sure things are being handled properly. The IRS is not going to care about fair or what everyone else does.

Our Pastor is reimbursed for gas so that is not an issue.
Expensing church account pastor
by: Anonymous

I think is only Fair other companies do it, why not the church.

Would you be willing to spend a whole day doing errands on behalf of the church, and not getting at list reimburst fir expenses? Food and gas?

Pastor most of the times do not get a fair salary, or benefits!

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