Unreimbursed Business Expenses—An Important Clarification

What treasurers should know.

Church Finance Today

Unreimbursed Business Expenses—An Important Clarification

What treasurers should know.

The Tax Court recently affirmed an important rule—employees who are entitled to be reimbursed by an employer for their business expenses, but who fail to request reimbursement, cannot claim a deduction for their unreimbursed business expenses. Gravett v. Commissioner, T.C. Memo. 1994-156.

Example. A church agrees to reimburse a minister’s business expenses up to $5,000 for 1994. The minister receives reimbursements of business expenses totaling $3,000 and claims a deduction for an additional $1,500 of business expenses for which no reimbursement was sought or received. The minister cannot deduct the $1,500 in expenses for which a reimbursement was available from the church.

However, if a church agrees to reimburse business expenses up to a specified amount, a minister or lay employee can claim a deduction for unreimbursed expenses in excess of this amount.

Example. A church agrees to reimburse a minister’s business use of a car at a rate of 19 cents per mile for 1994. The minister is reimbursed $1,900 for 10,000 miles of business travel. The IRS allows taxpayers to use a standard mileage rate of 29 cents per mile in 1994 to compute the business use of a vehicle. The minister can claim an unreimbursed business expense deduction for the amount by which the IRS approved rate (29 cents per mile) exceeds the amount reimbursed by the church (19 cents per mile), or $1,000.

Caution! Church treasurers who are authorized to reimburse a minister’s (or lay employee’s) business expenses, but who fail to do so, may be precluding any business expense deduction.

This article originally appeared in Church Treasurer Alert, September 1994.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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