An accountable reimbursement policy is a method for claiming and reimbursing professional or business expenses. For business and tax reasons, it is usually in the best interest of your church or nonprofit to have such a policy in place.
However, you need to realize that the rules for employee expense reimbursements are the same for churches and nonprofits as they are for all other businesses.
There are not any special rules for churches or nonprofits in relation to employees’ business expenses.
In order to be accountable, your reimbursement policy should comply with the following rules:
Employee business expenses included in your policy may include, but are not limited to:
1. Include a budget for your AR policy that will “cap” the allowable amount for each staff member.
2. Include the proper wording in your policy to cover reimbursing your staff member directly for their eligible expenses and/or paying for those expenses directly. Either method is acceptable and you can include both in your policy.
3. Properly substantiate expenses. The IRS requires the church or nonprofit to maintain good records and have actual receipts for any expense over $75 (you may use this figure or set a lower limit such as $25) and proper documentation to back up expenses.
The documentation must include:
4. Include a set time of when substantiation/receipts must be provided to your organization in the wording of your policy.The IRS requires that all substantiation of expenses occur within a "reasonable" time of the expense being paid or incurred.(This is set in the resolution and/or detailed policy plan..."30 days" is common, but the IRS considers "up to 60 days" to be a "reasonable" amount of time. (See Tax Topic 514)
5. Include wording authorizing advance payments.This can be especially beneficial for staff travel. Important...if an advance is given and exceeds the amount of business expenses substantiated, the staff person must return the excess within a "reasonable" time of the date incurred or paid.
6. Include wording that items, equipment, or property purchased by your church or nonprofit through the
accountable reimbursement policy belongs to
It would not pertain to small items such as small office supplies or personal religious items, such as robes. These items are used up or are so personal that they have little or no value to the church.