Accountable Plans

February 25, 2013

General Discussion:

An accountable plan is an employee reimbursement allowance arrangement or a method for reimbursing employees for business travel expenses that complies with IRS regulations.  The accountable plan also most include a plan by which employees return excess reimbursements (those in excess of allowable amounts) to the employer.  If an employer sets up and maintains an accountable plan, employee travel expenses do not have to be treated as taxable income.

There are certain requirements for accountable plans, including the following:

  1. The expenses must have a business connection (they must have been paid or incurred while performing services as an employee);
  2. The employee must adequately account to the employer for these expenses within a reasonable time; and
  3. The employee must return excess reimbursements or allowances within a reasonable period of time.

(I.R.C. § 62; Treas. Reg. § 1.62-2; IRS Publication 463 (2011); and Jean Murray, Accountable Plan, About.com, available at http://biztaxlaw.about.com/od/glossarya/g/accountableplandef.htm)