Accountable Plan
Daily car Log Weekly Travel Expense ~ Weekly Travel Expense on Excel(c)
This is to be contrasted with the "non-accountable" plan covered in a separate page.
This plan pertains to reimbursing an employee for various business expenses including mileage.
With regard to employee business expenses, an above-the-line deduction is allowed for expenses paid by the employee in connection with the performance of services as an employee and reimbursed under a "reimbursement or other expense allowance arrangement" with the employer. 651 This above-the-line deduction is permitted only if:
- the arrangement requires the employee to substantiate the expenses covered by the arrangement to the party providing such reimbursement within a reasonable period;
- the arrangement requires the employee to return any amount in excess of the substantiated expenses covered under the arrangement within a reasonable period; and
- there is a "business connection" or nexus between the amount designated for use for business expenses and the actual business expenses incurred by the employee.
If an arrangement meets the above-mentioned requirements (substantiation, return of excess amounts, and business connection), all amounts paid by the employer are treated as paid under an "accountable plan
Notation |
| Regs. §1.62-2(c)(2)(ii). In Announcement 90-127, 1990-48 I.R.B. 8, the IRS clarified that if, under an accountable plan, a payor pays a mileage allowance or a per diem allowance in lieu of reimbursing actual expenses and does not require the employee to return the amount of the allowance exceeding the federal rates, the excess portion is treated as if paid under a nonaccountable plan. The IRS further clarified that because an employee is not required to return the excess portion, the reasonable period of time provisions relating to the return of excess amounts, does not apply to the excess portion. Thus, in the case of a reimbursement, the IRS stated that the excess portion is subject to withholding and payment of employment taxes in the payroll period in which the payor reimburses expenses substantiated by the employee. In the case of an advance, the IRS stated that the excess portion is subject to withholding and payment of employment taxes no later than the first payroll period following the payroll period in which the expenses with respect to which the advance was paid are substantiated. Regs. §1.62-2(h)(2). If advances, allowances, or reimbursements for meal and entertainment expenses are paid under a nonaccountable plan, the nondeductible amounts (taking into account the §274(n) percentage limitation) are neither treated as gross income nor subject to withholding and payment of employment taxes. Regs. §1.62-2(h)(1), T.D. 8666, 61 Fed. Reg. 27005 (5/30/96).
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