Business expenses are expenses that are necessary to do your job or enhance your ability to do your job. The IRS allows some deductions for business expenses.
Some examples of business expenses include, but are not limited to:
- Books, trade journals, newspapers, and publications
- Professional organization dues
- Dues to chambers of commerce and similar organizations
- Continuing education
- Meals and entertaining with a clear business purpose
- Non-commuting transportation
- Business use of cellular phones
Your employer can reimburse you for these expenses by giving you a stipend each month or by setting up an accountable reimbursement plan.
The stipend method provides you with a set amount of money that is paid to you regardless of the business expenses actually incurred. You do not need to submit an expense report or receipts to your employer to support the business expenses. The amount of the stipend is included in your wages on your Form W-2, or if you are self-employed, on Form 1099-MISC. You may claim the allowable expenses as a deduction on your tax return. See the IRS website for details.
Note: If you are clergy, the Deason Rule applies. Consult your tax accountant or CPG’s Clergy Tax Return Preparation Guide.
Accountable Reimbursement Plan
Under this plan, you submit expense reports and receipts for business expenses, and your employer reimburses you for the expenses. Your employer does not report the reimbursements as income to you, nor are you able to deduct them on your income tax return. Your employer may limit the amount of business expenses that they reimburse.
- If the business expense is generated by work done as an independent contractor, the business expense may show up on your Form 1099 even though it has been reimbursed under an accountable plan. The payor has the option whether to include or exclude the amount.
The IRS has guidelines on maintaining records for business expenses under both of the payment plans. See the IRS website on record keeping for details.
Tips & Resources - Business Expenses
Using a separate credit card for your business expenses is an easy way to track them!
This material is for informational purposes only and is not intended as investment, tax, financial, legal or other advice. Your personal decisions should be based on the recommendations of your own professional advisors.
Unless otherwise noted, websites referenced herein that are outside the www.cpg.org domain are not associated with The Church Pension Fund and its affiliates (collectively, the Church Pension Group) and the Church Pension Group is not responsible for the content of any such websites.