@KSherwood wrote:
Just to revisit this. If a pastor is traveling out of state for one of their parishioner's weddings and the couple wants to pay for the pastor's hotel, airfare, food and car rental, does anything need to go through the church or can the couple just pay for it all?
Most of the time, the pastor will be doing this as a "side gig" and the income and expenses will be reported on schedule C.
Generally speaking, the pastor is a common law employee of the church if the church has control over employment conditions (hours of service, when the pastor is allowed to take vacation, and so on). It's possible that the church might have an employment contract with the pastor specifying that the pastor may not do outside work without the approval of the church and all outside work must be paid through the church. I personally would never agree to such a contract.
Assuming a normal business relationship, then the church controls the pastor's conditions of employment at the church, but the pastor is allowed to take side jobs. Weddings and funerals are almost always considered side jobs, even if held at the church between church members. The wedding couple might pay a professional fee to the pastor and a fee to use the church building, but the fee paid to the pastor is, from the pastor's point of view, self-employment income to be reported on schedule C, and not part of his pastoral wages from the church.
For an out of state trip, the pastor would report all the money they received as gross business income on schedule C as they would for any other kind of self-employed side job. That includes the fair market value of anything paid for by the couple--if the couple pays for the pastor's hotel, that's still considered part of the pastor's gross compensation. Then the pastor lists deductible business expenses, which includes travel, meals, and lodging, according to the usual rules for such business expenses, and pays income tax and SE tax on the net income. (If the pastor charges a $250 professional fee and has $1000 of expenses, and the couple pays $1250, the pastor has $250 of net taxable income. That the same outcome as if the pastor reported $250 of professional income and ignored both the expenses and the reimbursement, but the IRS wants to see the gross figures and the math.)
