Most prospective employees probably won’t accept a job based on the availability of an accountable plan. But offering one can help you retain valuable workers who submit frequent reimbursement requests.

What’s covered?

The IRS stipulates that all expenses covered in an accountable plan have a business connection and be “reasonable.” Additionally, employers can’t reimburse employees more than what they paid for any business expense. And employees must account to you for their expenses and, if an expense allowance was provided, return any excess allowance within a reasonable time period.

Examples of expenses that might qualify for a tax-free reimbursement through an accountable plan include tools and equipment, home office supplies, dues and subscriptions. Certain meal, travel and transportation expenses also qualify.

Informal documentation

How do you establish an accountable plan? It isn’t required to be in writing. But formally documenting your plan makes it easier for your nonprofit to prove its validity to the IRS if it’s challenged.

When administering your plan, your nonprofit is responsible for identifying the reimbursement or expense payment and keeping these amounts separate from other amounts, such as wages. The accountable plan must reimburse expenses in addition to an employee’s regular compensation. No matter how informal your nonprofit, you can’t substitute tax-free reimbursements for compensation that employees otherwise would have received.

Keep good records

The IRS also requires employers with accountable plans to keep good records for expenses that are reimbursed. This includes, to the extent applicable, documentation of:

• The amount of the expense and the date,
• Place of the travel, meal or transportation,
• Business purpose of the expense, and
• Business relationship of the people fed.

You also should require employees to submit receipts for any expenses of $75 or more and for all lodging unless your nonprofit uses a per diem plan.

Simple process

Because plans don’t have to be formal, they’re relatively simple to establish. But contact us if you need help setting up an accountable plan.

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Many Americans remain unemployed due to the COVID-19 pandemic — at least 9.8 million at the end of April, according to the U.S. Bureau of Labor Statistics. But that’s expected to change quickly as employers ramp up hiring activities. If your not-for-profit will soon need new staffers, you might want to start putting out feelers now.

Obviously, the decision to hire is a difficult one considering the economic uncertainty that may remain. But you also don’t want to miss out on the best talent. Here are some issues to consider.

Needs assessment

First off, do you need new employees? Even if you plan to expand services and introduce new programs, volunteers may be capable of picking up the slack. Or current staffers may be underused on projects that are stagnating or winding down. Carefully examine your nonprofit’s priorities and consider eliminating programs that aren’t meeting expectations so that you can redeploy human resources where you need them most.

If staffers have been working from home, you may want to call them back to the office (with any necessary safety protocols) before making the decision to hire. It’s possible some won’t want to return to in-person work. On the other hand, you may find you have enough hands once everyone’s back on site.

Financial considerations

The pandemic took a financial toll on most nonprofits. Others, however, have actually experienced outpourings of support. Whatever your situation, ensure you can fit any new staffers into your budget.

Even if you can, the fact remains that nonprofits are obligated to be careful financial stewards. Donors, watchdog groups and the media demand it. So consider how you’ll make the most of any new staffing budget before you spend it.

Outsourcing options

Remember that when you hire full-time employees, the expense isn’t limited to salaries or hourly wages — you’ll also be paying for benefits. In many cases, it’s cheaper to outsource functions, particularly accounting, IT and human resources work.

Outsourcing offers the additional benefit of being temporary if you aren’t happy with the service. Underperforming employees are much harder to let go.

Making the decision

The decision to hire is likely to be one of your organization’s toughest calls this year. Employees are expensive. And probably the last thing you want to do anytime soon is lay off people due to a social or economic crisis. Contact us. We can review your financials and help you decide how to proceed.

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