Accountable Plans Shift S Corporation Business Deductions From (Owner-)Employees To Employers. In short, an Accountable Plan is simply a reimbursement program, established by an employer, that allows employees to be reimbursed for business expenses they incur as part of their work.

What can be included in an accountable plan?

Accountable plans may include reimbursement for a number of different employee-related expenses, including:

• Employee travel expenses, including meals.
• Purchase of tools and equipment.
• Employee home office expenses.
• Mileage costs.
• Required uniforms not suitable for ordinary wear.
• Dues and subscriptions.

How do you create an accountable plan?

To offer an accountable plan, an employer must comply with three standards:

1. The expenses must have a business connection;
2. The expenses must be substantiated within a reasonable period; and.
3. The employee must return any money not spent to the employer, also within a reasonable period.

What expenses can be reimbursed under an accountable plan?

Business-related expenses incurred by employees can include such things as travel, meals, lodging, entertainment, or transportation. Employees are required to adequately account for expenses with records and to return any excess reimbursement within a reasonable period of time.

Can S-Corp owners use the per diem method?

The per-diem allowance method can’t be used to substantiate business travel expenses incurred by a person who owns more than 10 percent of an S corporation. Instead, you must turn in proof of your actual travel expenses to the corporation. You can then receive tax-free reimbursements from the company.

What is the difference between an accountable plan and a non accountable plan?

For accountable plans, the reimbursement or excess amount is excluded from income and is not subject to withholding taxes. In non-accountable plans, the reimbursement or excess amount is included in income and subject to withholding taxes. This occurs in cases when an employee fails to return excess reimbursements.

What are investment expenses?

An investment interest expense is any amount of interest that is paid on loan proceeds used to purchase investments or securities. Investment interest expenses include margin interest used to leverage securities in a brokerage account and interest on a loan used to buy property held for investment.