What expense category is Printing and Postage Costs?

For nonprofit organizations, printing and postage are constant and significant operating expenses. They are the backbone of communicating with stakeholders, whether it's through an informational newsletter, a direct mail fundraising appeal, or an annual report.

Unlike a for-profit business that might simply classify these as office expenses or advertising, a nonprofit must be far more precise. 

The IRS requires nonprofits to allocate these costs based on their function—is it a program expense, a fundraising expense, or an administrative expense? This guide will clarify how to categorize printing and postage costs according to these critical nonprofit accounting principles.

Printing and Postage (for Program or Fundraising) Category

There is no single expense category for all printing and postage costs. For a nonprofit, these expenses must be allocated based on the purpose of the materials being printed and mailed.

1. Program Service Expense: If the primary purpose of the printed material is to fulfill your organization's mission (e.g., an educational brochure, a public awareness newsletter), the printing and postage costs are a direct program expense.
2. Fundraising Expense: If the primary purpose of the material is to solicit donations (e.g., a direct mail fundraising appeal), the printing and postage costs are a fundraising expense.
3. Administrative Expense: If the material is for general overhead purposes (e.g., printing internal forms or mailing administrative letters), the costs are an administrative expense.

Important Considerations While Classifying Printing and Postage

The most critical factor for nonprofit compliance and transparent financial reporting is the accurate allocation of costs based on function.

The Purpose Test

The content and call to action of the printed material determine its category.

• Program: Does it educate the public or serve your constituents?
• Fundraising: Does it ask for a donation?
• Administrative: Does it support the general operations of the organization?

Allocation of Joint Costs

This is a key accounting principle for nonprofits. If a single mail piece serves more than one function—for example, a newsletter that contains both educational articles (program) and a prominent donation envelope (fundraising)—the costs of that mailing (printing, postage, etc.) must be allocated between the different functions. This joint cost allocation is critical for accurate reporting on your Form 990.

Applying For-Profit Principles

While the functional categories are specific to nonprofits, the nature of the cost is based on general business principles.

• Printing: Costs for creating brochures or appeals are similar to the advertising expenses a for-profit business would deduct, as noted in IRS Publication 535.
• Postage: IRS Publication 535 also lists postage as a deductible business expense.

Tax Implications and Recordkeeping

Properly allocating printing and postage costs is essential for a nonprofit's annual IRS reporting.

How to Report the Expense

Nonprofit organizations report their expenses by function on Form 990. You must report the total expenses for Program Services, Management and General (Administrative), and Fundraising. 

The allocation of printing and postage costs is a major component of this functional expense reporting. These figures are used by the IRS, donors, and watchdog groups to assess your organization's efficiency.

What Records to Keep

You must maintain meticulous records to substantiate your cost allocations. Your records should include:

• Invoices from printers, mail houses, and other vendors.
• Receipts for all postage purchases.
• A copy of each printed material to document its purpose.
• A clear and reasonable methodology for how you allocated any joint costs.

How Fyle Can Automate Expense Tracking for Printing and Postage

Fyle helps you capture and organize the various costs of your mail campaigns, making it easy to allocate expenses correctly for Form 990 reporting.

• Centralize All Invoices: Forward or attach your printers and mail houses invoices directly to Fyle for automatic and accurate data capture.
• Track by Campaign or Function: Code every cost to a specific campaign and allocate it to Program, Fundraising, or Admin.
• Allocate Joint Costs: Easily split a single invoice from a vendor between multiple functional categories within Fyle.
• Automate Your Accounting: Sync all categorized and allocated expenses directly to the correct GL accounts in QuickBooks, Xero, NetSuite, or Sage Intacct.