The IRS can supply details about accounting and record keeping for reimbursements. Employees who are reimbursed the Standard Mileage Rate or less per mile are not required to make any report on their tax return of the reimbursement unless they want to try to deduct any business auto expenses not fully reimbursed. If the reimbursement exceeds the Standard Mileage Rate, then the entire amount of the reimbursement should appear on Form W-2 as taxable income. This means any tax benefit may be lost under the deductibility rules mentioned earlier. The simplest method to handle auto expenses is to receive full reimbursement at the Standard Mileage Rate allowed by the IRS for all business miles.
Some churches provide some or all of their staff with the use of a church-owned vehicle.
When an employee uses a church-owned vehicle for both business and personal use, certain procedures are required for tax purposes. The employee must keep adequate records of the business use miles for which the church-owned car is driven. It is not enough to just keep personal use miles. The total miles the car is driven during the year should be determined based on odometer readings at the beginning and end of the year. Total miles driven less business miles provides the personal miles on which to determine personal use value.