Should The Tool Reimbursement Be Treated As Income On The Service Technician's W-2?

U.S. revenue enhancement police provides that congregations and other organizations employing ministers and other religious professionals may consider certain items as usual business expenses. Such expenses are not included in the compensation paid to individuals; they are function of the necessary expenses of the organisation and are non reported for income tax purposes.

Important Notes

Items of indelible value purchased with not-taxed professional expense funds are theproperty of the congregation. Such items may subsequently be purchased at their depreciated value by the employee.
The items beloware allowable as professional expenses. Yet, nuts that a staff fellow member needs in club to perform their job should exist funded through an appropriate budget line. (For instance, an employee should not need to pay for their function supplies or furniture through their professional person expenses.)
Under an Accountable Reimbursement Plan, unused professional expensesmay not be converted to salary. According to IRS rules, allowing an employee to take their leftover professional expenses as salarynullifies their Accountable Reimbursement Program, which then makes theentire amount of their expense line taxable. (Come acrossReimbursement Policies, beneath, for more on Accountable Reimbursement Plans.)

Allowable Expenses

Machine expenseswhile on official business concern (such as to meetings, hospital or abode visits, trips for educational purposes or to purchase supplies, travel with a youth grouping or a church school form, etc.) are reimbursable at the standard mileage rate in issue at the fourth dimension. The costs of commuting to and from dwelling house to piece of work are not allowable as business automobile expenses.
Travel expenseswhile away from home overnight for work or business, including air fare, taxis, rental automobiles, lodging, meals, and incidentals are all professional expenses. This includes costs to attend professional conferences.
Entertainment expensesstraight related to the mission or programs of the organization are considered professional expenses. These may include entertainment at home or in restaurants of members or potential members of the congregation.
Books and journalscaused and used for professional person purposes may be treated every bit business expenses.
Computers and related equipment costsmay be treated as a business expense through a Section 179 deduction if the items are used 50% or more for professional activities. Information technology is customary today to consider computers and peripherals as essential for the performance of one'south duties.
Educational expensessuch as tuition, books, and supplies are professional person expenses if related to one's professional condition or responsibilities, or to maintain skills needed in i's work. Travel solely for entertainment cannot be treated every bit a professional person expense. Travel in connectedness with educational activities, conferences, or worship services will usually be legitimate. Delight note:

Some Jewish and Christian groups have considered travel to the Holy Land every bit inherently inspirational and valid as serving a religious purpose, but this practice has come under IRS scrutiny.
Where the purpose of travel is both personal and business, the expense may be pro-rated every bit partly a business expense and partly a personal one.
Some employer/congregations have included reimbursement for expenses necessary to the overall physical, mental, and spiritual wellbeing of staff in this category of church building expenses. Nosotros recommend that such items exist addressed through a Department 125 flexible benefit plan or a health reimbursement arrangement.

Duesfor membership in professional organizations are legitimate expenses.
Telephone expenses, except for the bones charge for a home phone, may be counted as business organisation expense if related to the performance of one's duties.
Religious garmentsor robes may be purchased and cleaned with funds for professional expenses, but this does not utilize to garments worn as ordinary clothing.
Insurance premiums for malpractice insurance or coverage of business equipment may exist legitimate expenses.
Office suppliessuch as stationery, letterhead, etc. are legitimate business concern expenses.

Reimbursement Policies

By tradition, some religious organizations have fabricated stock-still sum monthly payments to their government minister or other staff for a "travel allowance" and take not requested an accounting for how the money was spent. U.S. taxation law does not permit professional expense funds to be paid to employees as unreported or tax-free income.

Expense moneys paid other than through an Answerable Reimbursement Policy should be reported to the IRS as "other income" on Class West-two, and so may exist claimed by the taxpayer as itemized deductions on Schedule A or Schedule C of the 1040 tax return.

It is strongly recommended that the congregation establish an Accountable Reimbursement Policy. Under such a policy, staff is reimbursed within thirty to threescore days for expenses advanced on behalf of the congregation, with reasonable documentation where advisable. IRS regulations specify that receipts should be provided for expenses over $75. I way of segregating business expenses is for the staff member to accuse them to a credit card used solely for this purpose. The church and then pays the credit carte statement as it would any other monthly expense, although the credit card argument in and of itself may non be sufficient documentation.

Whatsoever excess funds that have been advanced to a professional or employee for a trip or special purpose must be reimbursed back to the congregation within lx days or should exist alleged as additional income.

It is important to avoid confusion with other checks received by staff, such equally for cash bacon or a clergy housing assart. Reimbursement of professional expenses should not exist included in checks for those items.

About tax law and advice. While this data is believed to exist accurate, the staff of the Part of Church Staff Finances are not qualified taxation consultants. We urge congregations and professionals to consult tax specialists or accountants.

We also recommend that churches obtain references such as theChurch and Clergy Tax Guide,(800) 222-1840. This is the most comprehensive guide to the subject field for non-experts. The same author also publishes Church building Laws & Tax Report, a bimonthly journal reporting on legal and revenue enhancement developments affecting ministers and churches.

Canada

As tax laws in Canada may differ from those in the U.South., Unitarian congregations in Canada should contact the Canadian Unitarian Quango for information well-nigh professional expenses there.