The youth pastor buys pizza on a personal card. A deacon drives to the hospital three times a week. The office administrator orders printer ink on the church card and loses the receipt. Each of these is an ordinary church expense, and each can turn into taxable pay for the person involved if the paperwork is missing. The rules that decide which are the IRS rules for an accountable plan.
The three rules of an accountable plan
IRS Publication 463 and Publication 15 describe the same three requirements. An employer's reimbursement arrangement is an accountable plan when:
- There is a business connection. The expense was paid or incurred while performing services as an employee of the church.
- The employee substantiates the expense to the church within a reasonable period of time.
- Any excess is returned within a reasonable period of time. An advance that was not spent goes back.
Publication 15 says amounts paid under an accountable plan are not wages. Publication 1828, written for churches, adds that they are not required to be reported on the employee's Form W-2. Publication 15 also says the reimbursement must not be an amount that would otherwise have been paid as wages, so an arrangement that relabels part of someone's salary as "reimbursements" needs the tax adviser's review before it is used.
What substantiation means
Publication 1828 says employees must give the organization enough information to identify the specific business nature of each expense, and that broad categories such as "travel" or "miscellaneous business expenses" are not sufficient. Publication 463 says documentary evidence is ordinarily adequate if it shows the amount, date, place and essential character of the expense. A workable expense report therefore carries, for each line:
- The date, the amount and the vendor
- What was bought, and the ministry purpose in a few words
- For a meal, who was there
- The itemized receipt, not only the card slip
- The fund or budget line it belongs to
Publication 463 allows some exceptions to the receipt requirement, including certain expenses under $75. A church is free to be stricter, and a simple "receipt for everything" rule is easier to follow than a threshold people have to remember.
What counts as a reasonable period
The IRS says this depends on the facts and circumstances, then gives timings that are treated as reasonable: an advance received within 30 days of the expense, an adequate accounting within 60 days after the expense was paid or incurred, and excess amounts returned within 120 days. Those are safe harbors, not targets or hard limits. A monthly cutoff tied to the church's close keeps reimbursements in the right month and the right budget line; see the month-end checklist for church books.
Mileage
Publication 1828 says that when a church pays a mileage allowance at a rate less than or equal to the federal standard rate, the amount is deemed substantiated, provided the employee substantiates the time, place and business purpose of the mileage. It also says mileage reimbursed without that substantiation is included in the individual's income regardless of the rate, and that anything paid above the standard rate is treated as paid under a nonaccountable plan.
For 2026 the IRS lists two business rates: 72.5 cents per mile for January 1 through June 30, and 76 cents per mile for July 1 through December 31. A mid-year change makes the date on every trip matter. A mileage log needs the date, the starting point and destination, the purpose, and the miles. Publication 463 treats travel between home and a regular place of work as personal commuting, so the pastor's drive to the church office is generally commuting, not business mileage, and paying for it does not fall under the accountable plan. Unusual cases go to the tax adviser.
Church credit cards
A church card is not an exception to any of this. Publication 463 says the employee must account for all amounts received as advances, reimbursements or allowances, including amounts charged to the employer by credit card. Every card charge needs the same receipt and purpose as a reimbursement request. Good card practice is short:
- One card per named person, with a limit that fits the role
- Receipts and purposes turned in before the statement is paid, not after
- The statement reviewed by someone other than the cardholder
- No personal charges, even with the intention to repay
- The card account reconciled monthly like a bank account
The review step is a control as much as a tax matter. See internal controls for small churches.
When the substantiation never arrives
Publication 15 says that if expenses are not substantiated, or excess amounts are not returned within a reasonable period, the amount in excess of substantiated expenses is treated as paid under a nonaccountable plan. Those payments are wages. For an employee minister, Publication 1828 says such amounts are reportable on Form W-2 but are not subject to FICA taxes or income tax withholding. A flat monthly "expense allowance" paid with no reporting required lands in the same place: the publication's example is a $200 monthly allowance to a church secretary, all of it reported as wages.
The bookkeeper's part is to flag unsupported items while they can still be fixed, and to tell the treasurer what remains open at each month end. Whether and how an amount goes through payroll is decided with the church's tax adviser.
Volunteers
The accountable plan rules are written for employees. Churches also reimburse volunteers, and the same receipt and purpose discipline is sensible for them, but how the tax rules apply to volunteer reimbursements is a question to put to the tax adviser rather than assume.
A one-page written policy
Put the arrangement in writing and have leadership adopt it. One page can cover:
- Which expenses are reimbursable and who approves them, with no one approving their own
- What a request must include, and the deadline for turning it in
- The mileage rate the church pays and what the log must show
- How advances are requested and when unspent amounts are returned
- The church card rules
- What happens to an unsupported amount
Keeping accountable reimbursement records is part of ordinary church payroll and compensation bookkeeping. The policy itself, and any question about what is taxable, belongs with leadership and the church's CPA.
