Empower Your Business with an Accountable Reimbursement Plan
Empower Your Business with an
Accountable Reimbursement Plan
Empower Your Business with an
Accountable Reimbursement Plan
Who is it for?
The Advantages
Best Practices
An accountable reimbursement plan suits businesses that want to reimburse employees (including owners) for legitimate job-related expenses, tax-free. It’s especially popular among S corporations, where owners often act as both shareholders and employees, but can also be adapted for partnerships and sole proprietors with some limitations. The plan keeps expenses like home-office costs or mileage deductible at the business level. By separating personal and enterprise finances, it streamlines compliance and preserves deductions that might otherwise be lost if expenses were claimed personally.
An accountable plan excludes reimbursed expenses from employees’ taxable income and secures business-level deductions. This saves on payroll taxes and ensures compliance with IRS requirements by providing a clear framework for substantiation. S corporations particularly benefit by deducting costs like home-office and mileage, safeguarding key deductions after tax reforms. Proper documentation requirements also encourage better record-keeping and discourage misclassification or audit issues. Ultimately, these plans help maintain financial transparency while boosting tax efficiency and reducing risk.
Begin with a clear, written policy detailing allowable expenses, documentation rules, and submission deadlines. Instruct employees to keep accurate records, such as receipts and mileage logs, and require timely reimbursement requests. For multi-owner S corporations, consider uniform guidelines to address varying home-office costs and avoid conflicts. Regularly review and update the plan to stay aligned with IRS changes and reinforce compliance. Thorough record-keeping establishes transparency, reduces audit risk, and ensures that reimbursed amounts remain tax-free, benefiting both employees and the business.