A church approved a “car allowance” for one of itspastors. The pastor is considering a lease or new car purchase. What will bethe effect of his options on his taxes?
Answer:
Any car allowance should be set up using an “accountableplan”, which must meet three requirements under the Internal Revenue Code Sec.62(a)(2)(A): the reimbursements must have a business connection, must besubstantiated on a timely basis using the mileage records kept by the employee,and must be returned to the employer to the extent they exceed actual expenses.Using an accountable plan allows the car allowance to be excluded from anemployee’s income on his Form W-2. Mileage records should include the date,business purpose, and number of miles for each trip. The IRS sets maximum permile rates (55.5 cents for 2012, according to IRS Notice 2012-1). If the actualmiles multiplied by the IRS rate is less than the allowance, the pastor must returnthat amount to the church, otherwise the full allowance would be included in hisincome.
Readers of this post should search other blog entriesregarding alternatives to “car allowances” – specifically, more flexibleprofessional expense reimbursement plans. Also, leases can complicate thereimbursement arrangement, but that’s a topic of a future post!
The members of my Federal Taxation I classat Maranatha Baptist Bible College in Watertown, Wisconsin have taken on thechallenge of study and research to answer posted questions. Kyle Krohn of Iowagets credit for this one.
Hiç yorum yok:
Yorum Gönder