Nonprofit Travel Expenses: Essential Reimbursement Guidelines You Need to Know
Reimbursing your nonprofit staff and volunteers for their travel expenses may seem simple, but only if you have the right plan in place. More specifically, an “accountable plan,” as the IRS calls it. But what is an accountable plan, and how do you create and comply with one? Read on for guidelines and tips for properly managing and reimbursing nonprofit travel expenses.
What is an accountable plan?
It’s typical for nonprofits to reimburse staff and even volunteers for work-related travel expenses. The best way to reimburse staff is to use an accountable plan. While it’s a good idea to have your plan in writing, it’s not required. However, to prevent fraud, the IRS does require that:
- Any expense reimbursed is for a nonprofit business purpose
- The employee or volunteer accounts for the expenses within a reasonable period — usually no more than 60 days after the expense occurred
- The employee or volunteer returns any excess amounts received within a reasonable time — usually no more than 120 days after receipt of the extra money
These rules apply to all nonprofit volunteers, directors, and employees.
What qualifies as a nonprofit travel expense?
Do you and your nonprofit team know exactly what qualifies as a travel expense? It can get tricky. For example, is it ok to expense a glass of wine at dinner? Can you expense cash tips given during business trips? To make it clear for everyone, create a travel reimbursement policy outlining what’s reimbursable and, in some cases, what’s not. Many examples of nonprofit reimbursement policies are found online. Use those as a guide for building your own.
How should nonprofit mileage be reimbursed?
Each year the IRS issues a new standard mileage rate for use in computing the deductible costs of operating a vehicle for business and charitable expenses. (See the latest IRS table of standard mileage rates.) Nonprofit employees should be reimbursed for business mileage based on the business rate. Unfortunately, a volunteer’s mileage is capped at the charity rate of 14 cents per mile. However, unlike nonprofit employees, volunteers may be reimbursed for commuting miles. All mileage reimbursement requests must include travel dates, destination, business purpose, and total miles driven.
How do nonprofit staff account for other travel expenses?
Employees and volunteers must record all reimbursable travel expenses under their accountable plan. It is important to document each travel expense, including the items purchased, their respective costs, and the vendor from whom they were purchased. There are many free nonprofit expense report templates online that you can use. Expense reports should include supporting documents for each expense, like sales receipts, paid invoices, and canceled checks.
What are the benefits of an accountable plan?
When your nonprofit properly reimburses expenses under an accountable plan, there are three significant benefits gained:
- Your nonprofit doesn’t have to pay payroll taxes on the reimbursed payments
- The payments don’t need to be reported to the IRS
- The employee won’t have to include their reimbursed payments in their taxable income
Is there a way to make nonprofit travel reimbursement easier?
Credit cards can be a valuable tool when making purchases, especially since they make it easier to manage expenses. They also provide an excellent way for nonprofits to build credit. However, nonprofits should avoid using the same credit cards as for-profit businesses. A credit card tailored specifically for nonprofit use is a better choice — one like Divvy. Divvy is a business expense management solution owned by Bill.com. We recommend Divvy credit cards to our nonprofit clients because the card and service are free, and they don’t require a guarantee. Divvy also automates receipt tracking and expense management, simplifying travel reimbursements. In addition, it provides convenient virtual cards (like for a volunteer’s one-time use), allows for set budget limits on individual cards, and the ability to zero out a card. Even better, purchase rewards go back directly to the nonprofit organization. Divvy also seamlessly integrates with most popular accounting programs.
For more advice on handling travel reimbursement for your organization or to learn more about Divvy, we’re happy to help. Our nonprofit accounting team works with hundreds of organizations just like yours. So, don’t wait — schedule a quick call today to get the advice you need from a friendly, knowledgeable expert. We look forward to talking to you soon.
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