Reporting and Reimbursing Expenses
Can the church reimburse expenses from a different tax year?

Question: Can an expense incurred in a prior year be covered in the following year? Our pastor used up his 2009 accountable expense money in October 2009, but still has reimbursable pastoral expenses he incurred in November and December. Can those expenses be paid from his 2010 accountable expense allowance, which begins in January (our church runs on a fiscal calendar year Jan-Dec)?

And conversely, can a portion of a reimbursable expense allowance for one year that is not entirely used up in the current calendar year be carried over to the next year by perhaps putting it in an Accounts Payable-Pastor Expense account to draw on in the following year? This would be used to cover expenses occurring in the new year, not left over from the prior year.

Answer: You really are asking two distinct questions: (1) Can the church reimburse expenses from a different tax year? (2) May the church reimburse expenses from a different year and treat the reimbursement as a tax-free payment to the pastor?

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Posted:
September 21, 2010
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