What is an accountable plan?
An accountable plan is an expense reimbursement or allowance arrangement that requires employees to substantiate expenses and return unsubstantiated advances. With the plan, the reimbursements are tax-free to recipient employees. And the company can deduct the reimbursements as business expenses.
Do you use an accountable plan for your employee expense-reimbursements (and for yourself if you operate as a corporation)?
Well, I sure hope 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 comply with IRS regulations you’ll turn tax-free reimbursements into taxable W-2 wages. Ouch!
Want to make sure you handle things the right way and save yourself from expensive problems? Read my new article titled Tax Tips: TCJA Creates New Reasons for Accountable-Plan Expense Reimbursements.
Three ways our fact-filled article can help you:
- We’ll explain the three requirements you must meet to come out a winner. These include the “business compensation” requirement, the “adequate substitution” requirement, and the “return of excess advances” requirement. These are not as daunting as they sound, as you’ll discover when you read the full article.
- 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? Read the full article.
- You’ll learn how to handle entertainment expenses. Don’t cover disallowed entertainment expenses with an accountable plan. Instead, have your employees charge entertainment expenses directly to a company account. All will be explained when you read the full article.