The Pastor called me and said he had some exciting news that he wanted to share with me. A few moments into the conversation I discovered the news was that his Church was paying for an all-expense paid vacation and intended to make the checks payable to the airline, and hotels. When I questioned him as to why they were doing it in this manner, he informed me that they did not want him to be required to pay taxes on that which they considered as a blessing from the Church.
First of all, I am excited that a Church would have that kind of spirit where they would look for ways to bless their Pastor – rather than be a hindrance to him or her. As much as I was thrilled for him, I was much more shocked at the lack of integrity and the level of possible criminal activity I was hearing.
The days of the Church paying for things for the Pastor to reduce his Federal Income Tax burden are over. It is illegal for the Church to pay the Pastor’s personal cell phone bill from the Church bank account. It is illegal for the Church to send the Pastor on a cruise using Church funds.
As I explained some of the above mentioned items of concern with the Pastor, he began to query as to why a neighboring Church had just bought their Pastor a brand new Cadillac and presented it and the title to him the previous Sunday. His question was how can they do it if it is illegal?
My answer was simple. If the Church pays for an automobile for the Pastor, it must be titled in the Church’s name or the total cost of the car must be included within the Pastor’s W-2 for that year (Board and Pastors should be aware that anything added to the Pastor’s salary must be within the allowable 32.6% of total Church payroll or the Pastor will be placed into the Golden Parachute Rule).
Churches are not allowed to write checks payable to any vendors on behalf of expenses the Pastor may incur or for gifts given to the Pastor unless that expense is one of the 66 Reimbursable Expenses allowed by the IRS. Any checks written to him or her that are not one of the allowable items must be considered as salary and included in the Pastor’s W-2.
The Internal Revenue Service still allows for a Pastor to be well compensated for his or her Ecclesiastical labor, however, the compensation package must be within federal regulations and set by an independent certified organization.
How many Pastors are under compensated for their labor of the Gospel simply because they, or their Board, are not aware of the benefits that are available to every ordained minister of the Gospel? Every Pastor that would implement these 66 Allowable Expense Reimbursement Items would reduce his or her tax liability by thousands of dollars every year.