Accountable Plan

If you reimburse employees for mileage, educational classes or other business expenses, you need to have a policy called an Accountable Plan.  If you do not have one, the IRS can re-classify all these reimbursements as taxable income.

This does not need to be a lengthy document; my own business has a one page plan.    This lists the type of expenses that are reimbursable by the company, how they are to be reported and the timing of that reimbursement (i.e.  they cannot bring you a receipt from a year ago and expect to be repaid.)

For those who have employees that travel, the per diem reimbursement arrangements should be explicitly spelled out in this plan.  The US General Service Administration lists the federally prescribed rates by location at www.gsa.gov/portal/category/21287.  (They even have a mobile app available.)

For assistance in setting up an Accountable Plan specific to your own business, contact us today!

See Rev. Rul. 2012-25 dated September 10, 2012 for detailed examples published by the IRS.