What is an accountable plan?

An accountable plan is a reimbursement policy established by an employer to reimburse employees for business expenses they incur while performing their job duties. The plan must meet specific IRS guidelines to be considered accountable, including requiring employees to submit detailed documentation of their expenses and requiring them to return any excess reimbursements.

Under an accountable plan, employees are not required to report the reimbursements as income on their tax returns, and the employer can deduct the reimbursements as a business expense. This benefits both the employee and the employer, as the employee is not taxed on the reimbursements, and the employer can deduct the expense from their taxable income.

To be considered an accountable plan, the following criteria must be met:

1. Expenses must have a business connection: The expenses must be incurred while performing job duties or for the benefit of the employer.

2. Expenses must be adequately documented: Employees must submit detailed receipts and documentation of the expenses, such as the amount, date, and purpose of the expense.

3. Excess reimbursements must be returned: If employees are reimbursed for more than their actual expenses, they must return the excess amount to the employer within a reasonable period.

By implementing an accountable plan, employers can provide a clear and consistent policy for reimbursing employee expenses, while also ensuring compliance with IRS regulations.