What is accountable plan?

Sep 08, 2023

An accountable plan is a system for reimbursing employees for business expenses that they incur on behalf of their employer. It is a way for companies to ensure that their employees are properly reimbursed for legitimate business expenses, while also providing a clear and transparent process for tracking and reporting those expenses.

Under an accountable plan, employees are required to submit documentation and receipts for all expenses incurred. This documentation is then reviewed and approved by the employer before reimbursement is made. By requiring employees to provide documentation, the employer can ensure that expenses are legitimate and directly related to the business.

Benefits of an Accountable Plan

Implementing an accountable plan can provide several benefits for both employers and employees. First and foremost, it helps to prevent fraud and misuse of company funds. By requiring documentation for expenses, employers can verify that the expenses are legitimate and not personal in nature.

Additionally, an accountable plan can help to simplify the reimbursement process. With clear guidelines and procedures in place, employees know exactly what expenses are eligible for reimbursement and how to submit their documentation. This can save time and reduce confusion for both employees and the accounting department.

Tax Advantages

One of the key advantages of an accountable plan is the tax benefits it provides. When expenses are reimbursed under an accountable plan, they are not considered taxable income to the employee. This means that both the employee and the employer can save on taxes.

For employees, not having to pay taxes on reimbursed expenses can result in significant savings. They can deduct the expenses on their personal tax returns, reducing their overall tax liability. For employers, not having to include reimbursed expenses as taxable income can also result in tax savings.

Requirements for an Accountable Plan

In order for a plan to be considered accountable, it must meet certain requirements set forth by the IRS. These requirements include:

  • The expenses must have a business connection
  • The expenses must be substantiated with documentation
  • Any excess reimbursements must be returned to the employer

By meeting these requirements, employers can ensure that their accountable plan is in compliance with IRS regulations.


An accountable plan is a valuable tool for businesses to properly reimburse employees for legitimate business expenses. By implementing an accountable plan, companies can provide a clear and transparent process for tracking and reporting expenses, while also benefiting from tax advantages. It is important for employers to understand the requirements for an accountable plan and ensure that their plan is in compliance with IRS regulations.