What Is An Accountable Plan?
An accountable plan is your company’s written reimbursement policy that pays employees back for bona-fide business expenses without treating those reimbursements as taxable income to the employee. To qualify, reimbursements must: (1) have a business connection, (2) be substantiated with timely receipts/details, and (3) require employees to return any excess advances.
Why Do They Matter?
- Tax-efficient: Employees get reimbursed tax-free; the company gets the deduction.
- Helps get audit-ready: It creates a formal policy for the company that will protect you in the event of an audit.
- Provide Clarity: People know what’s reimbursable, what to submit as documentation, and when they’ll be paid.
How To Implement:
- Adopt a written policy – If you don’t already have an accountable plan, click this link to download an Accountable Plan Template.
- Update – Add your company name to the template. If there are any other parameters you want to add to the plan, add those in Part I.
- Define any exceptions – If you want to add any exceptions to the plan, add those in Part II.
- Sign & file – Sign the policy, and file it (e.g. company intranet; employee handbook; accounting policies; etc.).
Creating an accountable plan can take less than 10 minutes to set up and could save you hours of headaches in the event of an audit. Once it’s in place, reimbursements will be cleaner and audits will be easier. A simple, structured way to keep you compliant and reduce headaches!
