Expense Reimbursement Policy

The Church should set up a written Expense Reimbursement Policy to cover all reasonable, ministry-related expenses. The policy should outline any item that may be considered a qualified expense for the church. Any expense that does not fall within your guidelines must be approved by the appropriate supervisor before the expense is incurred. Employees may not be reimbursed for expenses that were not approved in advance and are deemed unnecessary or extravagant.

The following types of expenses may provide some guidance on what could be considered as a qualified ministry expense under your policy:

• Car rental, parking fees, and tolls
• Mileage on a personal vehicle at the current IRS reimbursement rate
• Advertising
• Professional Clothing (not suitable for general wear)
• Conventions
• Ministry / Professional Dues
• Education / Seminars
• Liability / Malpractice Insurance
• Laundry / Cleaning of Ministry Clothing
• Legal / Professional Expenses related to the ministry
• Travel (lodging, airfare, train fare, taxis, etc.)
• Office Supplies (postage, stationery, etc.)
• Religious Materials
• Rent on business equipment
• Subscriptions / Publications / Ministry Books
• Telephone (Ministry Use Only)
• Meals
• Equipment

The following expenses represents a shortlist, but are not limited to, of expenses that do not qualify as reimbursable:

• Airline club dues
• Traffic fines
• Personal Clothing
• Hair Salons
• Housing costs
• Students loans
• Non-ministry education costs

No policy can anticipate every situation that might give rise to legitimate ministry expenses. Any reasonable and necessary expenses should be considered as a qualified expense. When prior approval is required, the supervisor should use their best judgment to determine if an unlisted expense is reimbursable under your policy.

Credit Cards
Church-issued credit cards are to be used for purchases on behalf of the Church and for any ministry-related expense. At no time may an employee use a Church credit card for purchases intended for personal use; such expenses will require that the Church be reimbursed and may lead to revocation of credit card privileges and other discipline. Should this occur in error, personal expenses are considered taxable income to the employee. Credit card expenses require the same reimbursement documentation as other expenses.

Documentation
Requests for reimbursement of ministry expenses must be submitted on a monthly Expense Report. In order to comply with IRS regulations, all ministry expenses be supported with adequate records; employees are responsible for keeping these records as expenses are incurred. These records must include:

• The amount of the expenditure
• The time and place of the expenditure
• The ministry purpose of the expenditure
• The names and the relationships of individuals for whom the expenditures were made

Requests for reimbursement lacking this information should  not be processed and will be returned to the employee. While original receipts are preferred for all expenses, they are required for those greater than $25.00. Requests for exceptions to this policy should explain why the exception is necessary and be approved by management.

Approvals
Expense reimbursement forms, together with required documentation, must be submitted to the supervisor for review and approval. Once the expense reimbursement has been approved, it should be submitted for processing no more than 30 days after the expenses occurred. Supervisors approving expense reports are responsible for ensuring that the expense report have been filled out correctly with the required documentation and that the expenses submitted are allowable under this policy.

Contact Clergy Financial Resources to help you with the next steps.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com