What is an accountable plan?

An accountable plan is an expense allowance or reimbursement arrangement that requires employees to prove expenses and return unproved advances. With the plan, the reimbursements are tax-free to recipient employees. And the company can deduct the reimbursements as business expenses.

Is an accountable plan used for your employee expense-reimbursements (and for yourself if you operate as a corporation)?

Well, I might say you do. You see, if you don’t use an accountable plan, you’ll turn those improperly reimbursed expenses into taxable wages.

In other words, by failing to concur with IRS regulations, you’ll turn tax-free reimbursements into taxable W-2 wages. Ouch!

Want to make sure you can take over things in a proper manner and save yourself from expensive problems?


Three ways you can help yourself:

1. We’ll explain the three requirements you must meet to come out a winner. 

These include the “adequate substitution” requirement, “return of excess advances” element, and the “business compensation” requirement. These are not as frightening as they sound, as you’ll discover eventually. 

2. We’ll tell you why time is of the essence.

According to IRS regulations, both the substantiation of expenses incurred by your employees and the return of any excess (unsubstantiated-advances), must occur within a “reasonable time.” Want to make sure you meet Uncle Sam’s reasonable-time requirements?

3. You’ll learn how to handle entertainment expenses.

Don’t cover invalid entertainment expenses with an accountable plan. Instead, have your employees charge entertainment expenses directly to a company account.