21 Jul Tax Implications of Accountable vs Non-Accountable Plans for Churches
If your Church is paying for your ministry-related expenses, it is important to know if you are being paid under an Accountable plan or a Non-Accountable plan. It has a huge impact on your 1040 taxes.
Under an Accountable plan, you are reimbursed for expenses. If you go out and buy a $10 book, you give the receipt to the Church and they reimburse you the $10. Another way of doing an accountable plan is by using a Church credit card. When you use a church credit card, the reimbursement is instantaneous.
Under a Non-Accountable plan, the Church pays you a set amount of money that does not directly relate to an expense. For example, the Church might give you $1,000 at the beginning of the year to use for ministry expenses. Or the Church might give you a monthly allowance of $100 for auto expenses. In either case, the amount of the money does not vary based on how much expense you have.
The big difference on your tax return?
- Under an Accountable plan, your income is not taxable, and reimbursed expenses are not deductible.
- Under a Non-Accountable plan, income is taxable, but expenses may be deductible on Schedule SE.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.