Accountable Plan

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Accountable Plan

A plan used by a business to reimburse its employees for expenses they incur for work purposes. For example, an employee on a business trip may be required to pay for a hotel room with his/her own money and later receive a reimbursement. Under an accountable plan, the reimbursement the employee receives is not included in his/her income. Because it is not part of one's income, the reimbursement is not a tax write-off, which is why the accountable plan was devised.

Accountable Plan

A plan for reimbursing employees for expenses such as meals, entertainment, travel, and transportation incurred for business purposes on behalf of the employer. A plan is an accountable plan if the employer requires the employee to adequately account for all business expenses and to return any excess reimbursements. For employees under an accountable plan, reimbursements aren't entered on the tax return as income and the expenses aren't deductible.
References in periodicals archive ?
Accountable plans are required to meet four requirements in order for payments to recipient employees to qualify as tax-favored expense reimbursements, rather than taxable compensation:
reimbursement arrangements called accountable plans.
2000)), the IRS concluded that tool reimbursement plans typically operated at that time did not qualify as accountable plans. However, the Service said, a plan could qualify if, along with meeting other requirements, reimbursements were not made in lieu of other compensation.
It is even more important for Section 501(c)(3) and Section 501(c)(4) organizations to look carefully at how accountable plans are administered because of Intermediate Sanctions under Internal Revenue Code Section 4958.
Two recent revenue procedures relevant to accountable plans and per diem arrangements are: Revenue Procedure 2002-63, regarding applicable situations arising on or after October 1, 2002, and before November 1, 2003; and Revenue Procedure 2003-80, regarding applicable situations arising on or after November 1, 2003.
1.62-2, which contain rules for employee reimbursement arrangements called accountable plans.
The rules specified for accountable plans are exacting.
274(e)(3), reimbursement or other expense allowance arrangements include, but are not limited to, accountable plans as defined in Sec.
Without much success, automobile repair shops and other businesses have long sought to have such plans classified as accountable plans. Now, in Letter Ruling 200930029, the IRS has shown a pathway for obtaining that tax-favored status.
These plans must meet the rules applicable for accountable plans. As such, any excess mileage amounts must be returned to the employer within a reasonable time.
* There are many ways to calculate per-diem rates and mileage allowances for accountable plans.
Employers and employees generally view reimbursements from accountable plans as desirable, because they have a lot to lose if reimbursements are not handled properly.
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