Our country is built on nonprofit organizations. No matter the size, the impact of a nonprofit organization in a community can be tremendous.  The Internal Revenue Service regulates a number ofNonprofit Expense Reimbursement areas for nonprofits to ensure organizations are compliant with the tax-exempt rules. One of these areas is the proper handling of expense reimbursement. When employees and volunteers spend their personal money on travel, food, supplies, and other standard business expenses, they can be reimbursed for such costs. It is necessary that a nonprofit goes about this reimbursement process in a way that adheres to IRS guidelines. Below are some do’s and don’ts to help your nonprofit with this process.


Create an IRS Accountable Plan in Writing: An accountable plan establishes an entity’s policy for reimbursing workers or volunteers for business expenses incurred while on the job. These plans outline qualifying business-related expenses that are not subject to taxation. Types and examples of qualifying reimbursement expenses should be adequately outlined in this policy. There should be no uncertainty about what qualifies as a business expense for reimbursement purposes. Although the IRS does not require accountable plans to be written or submitted, the organization does have to prove that they can meet necessary requirements of an accountable plan. Therefore, it is highly recommended that the plan be written and made available to all employees and volunteers of the nonprofit.

Review reimbursement rates and information: It is important to stay up to date on IRS issued rates for reimbursement. For example, nonprofit organizations can reimburse business mileage 56 cents per mile while volunteers can be reimbursed 14 cents per mile in 2021. These rates typically fluctuate each year. To make sure your organization is following these and other IRS guidelines for reimbursement, visit: https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2021


Reimburse expenses that are unrelated to nonprofit’s purpose: Reimbursement may only occur for business-related expenses that align with the mission and purpose of the organization. Under no circumstances, should a personal expense be reimbursed by the organization. This could result in serious consequences from the IRS.

Take too long to account for the expense: To be reimbursed for the expense, it must be properly accounted for within 60 days of the expense being incurred. Encourage employees and volunteers to immediately submit expenses for reimbursements.

Discard receipts or invoices: To be reimbursed, employees and volunteers must provide the appropriate receipt or invoice that includes the purchase information – what was purchased, the cost, the vendor and the date. This is an effective way to ensure fraudulent activity is not taking place. Additionally, reimbursements must be for the exact amount on the invoice or receipt. If a person is overpaid for their expenses, they have an obligation to return the excess within 120 days of their purchase. By including proper receipts and invoices, this issue should be avoided.

If your organization has further questions regarding expense reimbursement for nonprofits, contact the professionals at Gilliam Bell Moser LLP.