Some churches give pastors (or other employees) monthly expense allowances in their paycheck. The allowances provide a way to advance cash to employees so that they can purchase items needed for the church or to carry out their role within the church.  There are two important things to keep in mind if your church does this. 

1.  The church needs to be aware that the expenses must be substantiated under an accountable plan, the same way a reimbursement would.  Among other things, proper substantiation includes a receipt as well as a documented business purpose. Otherwise, the allowance is taxable income.

2.  Further, some churches will allow the employee to keep the portion of the allowance that wasn't used and call it a "bonus". Taking this action would not only cause the "bonus" to be taxable income, but would also cause the entire allowance to be taxable (even the portion that was properly substantiated). This is not recommended and can cause church employees heartache come tax time.

Expense allowances are one of many ways to allow pastors to purchase items for the church.  Purchase orders, expense reimbursements and credit cards are a few others.  Each have their own advantages and pitfalls.  Which methods work well for your church?