Q: Are there expense reporting forms that the IRS requires churches use? What other recordkeeping rules does the IRS require?
A: Various expenses, if incurred for a bona fide business need, can be reimbursed by an employer, including churches. Like any business expense reimbursement, the reimbursement must comply with an accountable reimbursement plan in order to be non-taxable to the employee.
One of the requirements for an accountable reimbursement plan is that the employee must make an adequate accounting of the expense, in accordance with IRS standards.
Reimbursements that comply with an accountable reimbursement plan are not counted as taxable income to the employee. However, any reimbursed expenses that do not comply with an accountable reimbursement plan should be treated as income to the employee.
Recordkeeping & Substantiation
To comply with the adequate accounting rule, the IRS requires certain substantiation rules based on the type of expense. The following chart provides examples of documentation that the IRS requires for various expenses:
How to Prove Certain Business Expenses
From IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses
| IF you have expenses for... | THEN you must keep records that show details of the following elements... | |||
| Amount | Time | Place or Description | Business Purpose Business Relationship | |
| Travel | Cost of each separate expense for travel, lodging, and meals. Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. | Dates you left and returned for each trip and number of days spent on business. | Destination or area of your travel (name of city, town, or other designation). | Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. |
| Relationship: N/A | ||||
| Gifts | Cost of the gift. | Date of the gift. | Description of the gift. | |
| Transportation | Cost of each separate expense. For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. | Date of the expense. For car expenses, the date of the use of the car. | Your business destination. | Purpose: Business purpose for the expense. |
| Relationship: N/A | ||||
- Tip: Many expenses less than $75 are not required to be accompanied by receipts according to the IRS; however, the church can make its reimbursement policy more stringent if it wishes.
The IRS doesn’t have a specific form that is required when reporting business expenses. However, the IRS provides examples of expense reporting forms that churches can use.
- Tip: Churches should use these worksheets, or similar ones, to ensure that reimbursements comply with IRS requirements.
These worksheets are available for download at the end of this article:
- Mileage Log
- Expense Report
Best Practices
For best practices related to specific types of expenses, see the following articles:
- Travel Expenses
- Credit Cards
- Cell Phones
- Internet Service
- Allowance Accounts
File Downloads
Recordkeeping Logs
