Pastor Gray attended a conference two months ago and today you received a handwritten note from him itemizing his expenses without any receipts. What are you to do?
If you don’t have a written policy regarding how expenses are reimbursed, you will have a hard time enforcing accountability for reimbursable expenses. The best way to handle this is to have something in writing regarding procedures so that when you have an outdated request or one with no receipts, you have a policy to encourage appropriate accountability. As a church, money management matters and it is important to have accountability for all the expenses paid for by the church.
The usual method for nonprofits is to pay employees and volunteers the precise amount of their expenses. The plan would allow reimbursement of expenses if:
- The expense is related to the ministry of the church and would qualify as a deduction if the expense were not reimbursed. This expense should be approved by a supervisor or volunteer coordinator as appropriate prior to incurring the expenditure. Since self-employed pastors are unable to deduct church expenses on their taxes, submitting the expenses for reimbursement by the church is the best method for covering their extra costs.
- The employee or volunteer provides adequate substantiation of the expense such as receipts or credit card reports for all expenses over $75.
- If an advance is allowed for employees, the excess reimbursement is returned within a reasonable time.
The church must then decide on what is considered a “reasonable time.” An expense should be claimed within 30 days and no longer than 60 days after it is incurred according to the IRS.
Another reimbursable item is mileage. Adequate substantiation of mileage for a pastor should include a mileage log with miles, date, and the purpose of the trip, i.e. visiting Ann Vander Smit at the hospital. Mileage expense should be reimbursed at the IRS rate per mile. For employees, the rate for 2010 is 50 cents per mile. If a road trip is planned and the expected cost by paying the mileage rate will exceed a rental car cost, a vehicle should be rented instead. Also, ensure that you have a rental rider on your insurance so you don’t have to pay the extra coverage at the rental agency. Finally, if you have a church credit card, rent the vehicle on the credit card as most credit cards have some rental vehicle coverage if there is damage.