Clergy Compensation and Reimbursements

Clergy Compensation Form for 2017

The compensation form to be used for compensation after January 1, 2017 and the instructions for the form can be found in links to the right.  There will be a new compensation form for 2017 and the web-site will be updated when it is ready.

A church should never withhold FICA taxes on a clergyperson.  The church is not required to withhold income taxes for a clergy person but may do so at the clergy person’s request.  Lay persons serving in a TBS status are not clergy for the purposes of this exemption from withholding.

Clergy Reimbursement for Expenses

All clergy compensation packages approved after January 1, 2015, must have accountable reimbursements.  That is, there is no longer any unaccountable reimbursements (what was commonly referred to as Category IV income) whereby a church just paid the pastor a certain amount periodically for expenses and did not require any receipts.

In order to have travel and professional expenses paid for Clergy and other staff members and not be considered compensation to the individual receiving the payment, an Accountable Reimbursement Plan must be adopted and in-place prior to any expenditure being incurred or reimbursement being made.

If the church is listing amounts in Section III of the form for Clergy Compensation, a plan needs to be adopted by the church at Charge Conference or the time the Salary package is approved.  Such a plan should require itemized lists of expenses and itemized receipts for anything over a certain dollar amount (per IRS rules receipts must be provided for anything over $75 but a lower dollar amount may be set and it is recommended that the limit be $15 or lower).

The links to the right provide information from the General Council of Finance and Administration on Accountable Reimbursable Plans and from the Internal Revenue Service on business expenses.  The policies and sample voucher form from the GCFA can be used as a guide in adopting a plan.