What is an Accountable Plan?
What is an Accountable Plan?
An S-Corporation can use an accountable plan to reimburse employees (including owner-employees) for business-related expenses without treating those payments as taxable income. This setup helps reduce taxes for both the S-Corp and the employee, while staying in line with IRS rules.
🔍 How It Works for an S-Corporation
Set up a formal accountable plan
The S-Corp adopts a written plan that outlines:Which expenses are reimbursable (e.g., mileage, home office, meals, supplies)
What documentation is required
How and when to return excess reimbursements
Employee pays for business expenses personally
This could be:Driving their personal vehicle for work
Using part of their home as a home office (the only permissible method)
Business portion of their cell phone and internet.
Employee submits documentation
Mileage logs, receipts, or expense reports must be submitted within a “reasonable time” (typically 60 days).
Must include amount, time, place, and business purpose.
S-Corp reimburses the employee
Reimbursement is not included in their W-2.
It’s a deductible expense for the S-Corp, and the employee doesn't pay tax on it.
If there's excess reimbursement, the employee must return it within a reasonable time (usually 120 days), or it becomes taxable income.
✅ Why It Matters
Tax-free for the employee (owner or non-owner)
Tax-deductible for the S-Corp (reduces your business income for expenses already in your budget)
Blueprint Tax Partners provides clients a spreadsheet to track these expenses. If you have questions please contact info@bluetaxplan.com