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According to a variety of surveys, close to 80 percent of the churches said that employees couldn’t do their job efficiently without cell phones.

Despite being an integral part of daily work, many churches still do not have an effective cell phone reimbursement policy in place. 

With constant updates and advancements in cell phone technology, it only makes sense that you create a cell phone policy that can adapt to change.

Once the church decides to pay employees for ministry expenses, it should decide whether to follow the Accountable plan or the Non-Accountable plan.

What is an Accountable plan?

An Accountable plan lets you reimburse employees by following IRS regulations on business expenses. According to the IRS regulations:

  • The employee must show that the cell phone and the accompanying service plan was used for a ministry purpose. 
  • The employee must produce an expense report, along with the receipts.
  • The employee must return the excess amount to the church. 

By opting for the accountable plan, the employees do not have to report the reimbursement as taxable income.

What is a Non Accountable plan?

Simply put, any church that does not follow the rules mentioned under the Accountable plan comes under the non-accountable plan (aka Allowance plan). According to the non-accountable plan, employees receive a monthly allowance for expenses that wouldn’t need any documents for proof. This allowance is considered taxable income and should appear in the employee’s W-2 form.

Determine the cell phone policy 

Once the church decides the plan, the next step would be to choose the cell phone policy. The following are the policies you can implement:

  • Stipend policy: Per the non-accountable plan, the church provides a monthly allowance to buy a phone and a service plan. The church records the allowance in W-2 and can consider it for employment tax withholding and income tax.
  • Church Owned, Personally Operated (COPE): In a COPE plan, the church purchases both the cell phone and the service plan. As long as there is a ministry connection, it is considered a working condition fringe benefit. Personal use of COPE phones comes under de minimis fringe benefit. Ensure that your policy follows the guidelines set in the accountable plan.
  • Expense reimbursement: In a typical reimbursement policy, employees purchase a cell phone along with the service plan. The church then reimburses the initial cost of the cell phone and the service plan fees each month on receiving the associated receipts. 
  • Bring your own device (BYOD): In BYOD, the employee must have a personally owned cell phone that can be used for ministry purposes as well. If the employee buys the phones themselves, it is not included on Form W-2. Quite similar to COPE, the church will take care of the service plan. Tax treatment is the same as COPE, for ministry and personal use.

That said, it is not a one-size-fits-all scenario. Your policy depends on factors like acquisition costs, data security, ease of access, etc. While BYOD reduces the acquisition costs for the church, it comes at the cost of data security. Similarly, although COPE takes care of data security and improves productivity, it entails a lot of hidden costs. Churches can mix and match two or three of these options to see what works best for them.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com

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