Minister Accountability Plan

[Sheilah]

In a recent visit with his tax professional, our Pastor was told to handle his ministerial expenses differently for 2019. They are asking that he submit all ministry related expenses paid out of his pocket to the church on a monthly basis. That amount would then reduce his housing allowance (he was also advised to put everything in housing allowance so he does not receive any taxable salary) but his checks would remain the same. He needs this information to be reflected on his pay stub.

Example: Weekly Housing Allowance - $1000.00
Accountability Plan - (80.00)
Adjusted Housing Allowance - $920.00

Weekly Paycheck - $1000.00

Can someone please point me in the right direction on this and has anyone else heard about these changes for 2019? Thanks.

Powerchurch Version 11.1

Sheilah

[NeilZ]

In a recent visit with his tax professional, our Pastor was told to handle his ministerial expenses differently for 2019. They are asking that he submit all ministry related expenses paid out of his pocket to the church on a monthly basis. That amount would then reduce his housing allowance (he was also advised to put everything in housing allowance so he does not receive any taxable salary) but his checks would remain the same. He needs this information to be reflected on his pay stub.

Example: Weekly Housing Allowance - $1000.00
Accountability Plan - (80.00)
Adjusted Housing Allowance - $920.00

Weekly Paycheck - $1000.00

Can someone please point me in the right direction on this and has anyone else heard about these changes for 2019? Thanks.

Powerchurch Version 11.1

Sheilah

The amount set as housing allowance has to be set by the church board. So you can't unilaterally (nor can he) declare that everything is housing. That has been required by the IRS for years.

The Expenses have always been something that the IRS wants to see, and thus show reimbursement for those expenses. This has always been the case in every church I've been in and involved with financial matters. The pastor keeps track of their mileage, and other ministry related expenses, and turns them in with any receipts, for reimbursement.

What all this does is basically have the pastor just pay self-employement taxes on his housing allowance.

That said, as I mentioned above, you cannot change anything until the church board authorizes this for any future paychecks. So, if the next paycheck is the end of the month for the period of March 16 through 31st. This change has to be published in the church board meeting minutes, and should spell out that this is by the pastor's request. This is to keep the CHURCH legal.

[Sheilah]

Neil -

Everything is set by the church board and properly documented. His tax person is saying not to get reimbursed, but instead, lower his reported income. This does not apply to mileage, only other ministry expenses that he pays for out of his pocket. Previously, these were deducted when his taxes were done but according to the tax expert, it can no longer be done that way as of 2019.

Thanks.
Sheilah

[NeilZ]

Neil -

Everything is set by the church board and properly documented. His tax person is saying not to get reimbursed, but instead, lower his reported income. This does not apply to mileage, only other ministry expenses that he pays for out of his pocket. Previously, these were deducted when his taxes were done but according to the tax expert, it can no longer be done that way as of 2019.

Thanks.
Sheilah

OK .. if the pastor was not being reimbursed for his expenses, and then deducting at tax time, I can see the tax expert seeing that as a problem. The IRS would rather have accountable expense system whelre the person is reimbursed by the business for expenses with all mileage and receipts turned in to the company. As you can tell, this is something that has been done for business for years.

I don't know of anything in 2019 that says his reported income should be lowered. That is something that the church board should do its own inquiry about.

[TonyL222]

In a recent visit with his tax professional, our Pastor was told to handle his ministerial expenses differently for 2019. They are asking that he submit all ministry related expenses paid out of his pocket to the church on a monthly basis. That amount would then reduce his housing allowance (he was also advised to put everything in housing allowance so he does not receive any taxable salary) but his checks would remain the same. He needs this information to be reflected on his pay stub.

Example: Weekly Housing Allowance - $1000.00
Accountability Plan - (80.00)
Adjusted Housing Allowance - $920.00

Weekly Paycheck - $1000.00

Can someone please point me in the right direction on this and has anyone else heard about these changes for 2019? Thanks.

Powerchurch Version 11.1

Sheilah

First I am NOT an accountant and am Not giving tax advice - just discussion. I am not qualified to give tax advice. With that disclaimer, I read an example of something like this in the "Church Tax & Law" Church & Clergy Tax Guide. However, their example reduced the Pastors income by the amount of the "nonaccountable plan" business and professional expenses - not housing. As NeilZ pointed out, The Board of Directors set Housing allowance and not the Pastor. Also, if your church has an Accountable reimbursement plan in place, I am not sure the Pastor can opt out. Best bet is for the church to consult with it's own CPA firm for guidance.