Charitable nonprofits pave the way for the unheard to be heard by creating and supporting healthy communities. If you are already running a nonprofit organization (NPO) or planning to start one, a nonprofit travel policy is a must-have.A solid travel expense reimbursement policy for nonprofits helps you to meet the IRS guidelines and keep finances transparent to donors. Most importantly, it clearly spells out rules related to reimbursing employees who spend personal funds on organizational expenses.This guide will walk you through what every travel policy for nonprofits must have. Starting from common business expenses to expense reporting and reimbursement, we’ll cover every little detail to help you stay IRS-compliant.

Both charitable and other nonprofit organizations are eligible to be tax-exempt under Internal Revenue Code Section 501(c)(3). To benefit from this, nonprofits must keep documentary evidence of travel-related expenses and reimbursements.Some of the most common business travel expenses for non-profits are:Make sure your nonprofit travel policy outlines the list of expenses eligible for reimbursements and how employees can claim them.

A nonprofit may be exempted from taxes but not from the following IRS regulations.The

IRS Publication 463

clearly outlines rules on deductible expenses, reporting procedures, records for proving expenses, and ways to treat expense reimbursements.Nonprofit organizations reimbursing their employees should do so under an

accountable plan

. Otherwise, these reimbursements will be treated as taxable wages.If you are opting for an accountable plan, here are a couple of relevant pointers to remember from the IRS Publication 463:When it comes to expense reimbursement, it’s super important to collect itemized receipts from your employees. These original receipts should clearly show how much money was spent, for what purpose, when, and where.Ultimately, these receipts help you to prepare and submit an accurate expense report for tax audit purposes. They can also help you identify violations of organizational policies or a grant agreement.Overall, your nonprofit travel expense report must have:

When a nonprofit organization doesn’t adopt an accountable plan, travel-related reimbursements will be considered as taxable wages. In such cases, the employer must:An employee should:

According to the IRS Publication 463, there are certain situations when nonprofits are exempt from submitting travel expense receipts. These are:Despite these exemptions, many nonprofit organizations ask their employees for receipts beyond a much lower threshold, just in case.Adopting

per diem rates

may help your nonprofit organization avoid expense reporting-related paperwork. But it’s wise to ensure that you meet federal guidelines and rates before implementing them. Also, treat the IRS Publication 463 as your go-to reference for guidelines around per diem plans.If you are opting for per diem rates, make sure to clearly state so in your nonprofit travel and reimbursement policy.

The mileage rates issued by the IRS dictates the deductible costs of operating automobiles for charitable and business purposes. The standard mileage rate for 2021 is:Nonprofit organization employees and board members are eligible for business mileage reimbursement whereas volunteers will receive the charity rate. However, volunteers may receive reimbursement for commuting mileage which employees are not eligible for.Some nonprofits reimburse actual business trip expenses instead of IRS standard mileage rates. Depending on the nature of engagement, actual expense reimbursement may cover the following items.An effective nonprofit travel reimbursement policy should clearly state the mileage reimbursement rules. Make sure these rules are compliant with

IRS Topic No. 510

Business Use of Car.For ease of reimbursement calculation and tax exemption of mileage reimbursement, you may ask volunteers and employees to submit the following documents and applicable receipts:You should also encourage employees and volunteers to keep a copy of these receipts and documents. It will help them prove that the reimbursement doesn’t fall under taxable income. In case you are not reimbursing volunteer travel expenses, it will be considered a charitable contribution.

Nonprofit organizations often pay advances to employees. Excess funds from these advances must be returned immediately at the end of the trip.If you are not comfortable with advances, you can also issue an organization credit card or a purchasing card (P-cards). There must be clear rules on what these cards can be used for.For example, employees can make business purchases with the credit card and personal expenses with the P-card. You can also set spending limits on both of these cards.

Apart from what we’ve mentioned above, your nonprofit travel and reimbursement policy should also clearly set policies around travel planning, approval, and reimbursement process. For example, you may consider adding these pointers to your policy:When you replace paper-based processes with a business travel management tool like

TravelPerk

, you can easily save more on flights, hotels, and benefit from a streamlined nonprofit travel management process for your nonprofit. The VAT recovery tool saves you and your business money, and you can even upload your travel policy to ensure 100% compliance.

Creating a nonprofit travel and reimbursement policy is crucial for offering a seamless experience to travelers and complete transparency to donors. Make sure that you clearly mention every rule to help your employees stay compliant with IRS tax policies.Keeping things clear is essential for ensuring a successful travel policy. Everybody needs to know what, where and when they can spend when traveling for business.

Get in touch

with the TravelPerk team to discuss how you can start experiencing transparent, hassle-free corporate travel.