<\/p>\n
Accountable plans remain the most tax-efficient way for nonprofits to reimburse employee business expenses. When properly structured and implemented, these plans allow reimbursements to be excluded from employees\u2019 taxable income and save payroll taxes for the organization.<\/p>\n
Eligible expenses<\/strong><\/p>\n To qualify under an accountable plan, reimbursements must meet three core IRS criteria: 1)\u00a0they must be for expenses that have a legitimate business purpose, 2)\u00a0those expenses must be adequately substantiated, and 3)\u00a0any excess advances must be returned within a reasonable period. \u201cReasonable\u201d is generally interpreted under IRS safe-harbor rules, such as substantiating expenses within 60\u00a0days and returning excess amounts within 120\u00a0days.<\/p>\n Qualifying expenses commonly include business-related travel, meals, lodging, transportation, professional dues, continuing education, and necessary tools or supplies. Home office expenses may qualify in limited circumstances, but only when they\u2019re directly tied to the employer\u2019s business needs and not personal\u00a0use.<\/p>\n A formalized policy<\/strong><\/p>\n Although the IRS doesn\u2019t require accountable plans to be in writing, a documented policy is generally recommended \u2014 especially for nonprofits subject to heightened governance and audit scrutiny. A written plan helps demonstrate compliance and supports internal controls.<\/p>\n It\u2019s also critical that reimbursements are clearly separated from wages. Accountable plan payments must be made in addition to regular compensation and can\u2019t be used to recharacterize taxable wages as tax-free reimbursements. Misclassification can trigger payroll tax liabilities and penalties.<\/p>\n Recordkeeping standards<\/strong><\/p>\n The IRS also requires employers with accountable plans to keep good records for expenses that are reimbursed. For each expense, to the extent applicable, documentation should include\u00a0the:<\/p>\n Receipts are generally required for lodging and for any expense of $75 or more. If your nonprofit uses per diem rates for travel, receipts aren\u2019t required. But ensure your per diems align with current federal rates and that employees still substantiate the time, place and business purpose of travel.<\/p>\n Integrating your plan with digital expense reporting tools can improve compliance, streamline approvals and strengthen audit trails. Nonprofits should periodically review their accountable plans to ensure they remain aligned with IRS regulations, state laws and organizational policies.<\/p>\n Establishing (or refining) an accountable plan<\/strong><\/p>\n A well-structured accountable plan can provide tax benefits for nonprofit organizations and their employees. It can also help ensure reimbursements are handled consistently, transparently and in line with IRS expectations.<\/p>\n If your nonprofit hasn\u2019t reviewed its reimbursement practices recently, now is a good time to do so. We can help you assess whether your current policy meets accountable plan requirements, identify potential areas of risk and implement a structure that supports both compliance and operational efficiency.<\/p>\n \u00a9 2026<\/em><\/p>\n <\/body> Accountable plans remain the most tax-efficient way for nonprofits to reimburse employee business expenses. When properly structured and implemented, these plans allow reimbursements to be excluded from employees\u2019 taxable income and save payroll taxes for the organization. Eligible expenses To qualify under an accountable plan, reimbursements must meet three core IRS criteria: 1)\u00a0they must be […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,10,15],"tags":[8,11,12],"class_list":["post-17501","post","type-post","status-publish","format-standard","hentry","category-articles","category-news","category-not-for-profit","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17501","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=17501"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17501\/revisions"}],"predecessor-version":[{"id":17502,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/17501\/revisions\/17502"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=17501"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=17501"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=17501"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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