Travel, Entertainment and Gift Expenses

Posted on Wednesday, September 09, 2015

Nonprofit organizations must maintain documentation for receipts and disbursements just as any other for profit entity is required to do.  Documentation is necessary to prove that the nonprofit qualifies for tax-exempt status or should be classified as a public charity. 

Supporting documentation for expenses should be maintained by the organization to prove that the expense was a reasonable business expense to carry out the organization’s mission.  Often times a nonprofit will reimburse employees or board members for meals or travel related to carrying out the organization’s mission.  The IRS has given specific details of items that should be included in the documentation for supporting these types of business expenses.

ExpenseTravel

Records should include:

               Amount – Cost of each separate expense for travel, lodging and meals.

               Time – Dates left and returned for each trip as well as number of days spent on business.

               Place – Destination of travel.

               Purpose – Business purpose for the expense.

ExpenseMeals and Entertainment

Records should include:

               Amount – Cost of each separate expense.

               Time – Date of meal or entertainment.

               Place – Location of meal or entertainment and type.

Purpose – (1) Business purpose for the expense.  (2) The nature of the business activity and names of individuals participating, as well as business relationship of individuals.  (3) If the entertainment was directly before or after a business discussion: date, place, nature and duration of the business discussion and the identities of individuals who took part in both the business discussion and the entertainment activity.

ExpenseGifts

Records should include:

               Amount – Cost of gift.

               Time – Date of gift.

               Description – Description of gift.

By maintaining timely and accurate records, the organization will have adequate support to prove reasonable business expenses if it is ever examined by the IRS.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

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