![]() ![]() Substantiation: The employee must substantiate his or her business expenses by providing the employer with evidence of the amount, time, place, and business purpose of the expense. In order to have an accountable plan, an expense reimbursement policy or advance payment program must meet the following three conditions:īusiness connection: The expense must occur in the performance of services as an employee of the employer. While they’re not required by the IRS, accountable plans help you set criteria that comply with IRS regulations on what reimbursements are deductible and what reimbursements count as taxable income.Īn accountable plan for employee expenses acts as a guard rail for employees to avoid being taxed on employer reimbursements. What Is an Accountable Plan for Reimbursing Employees?Īn accountable plan is a plan under which allowances or reimbursements paid to employees for business-related expenses are not counted as income and are not subject to withholding. of IRS_ Publication 15, (Circular E), Employer's Tax Guide_, states that expense reimbursements do not have to be included in an employee's wages if the business has an “accountable” plan. Most businesses reimburse such expenses, but are business expense reimbursements taxable income to the employee? #MONEY GIVEN TO EMPLOYEES FOR DAILY EXPENSES DOWNLOAD#interested in learning more about creating an accountable expense plan? Download your free copy of Business Expenses: A Beginner's Guide To Building A Plan to find the helpful advice you're looking for. These types of reimbursable expenses tend to occur when employees travel for work, but can be associated with other activities related to their employment, including, for example, certain purchases of work-related supplies or tools. When employees receive an expense reimbursement, typically they won’t be required to report such payments as wages or income. ![]() The expense reimbursement process allows employers to pay back employees who have spent their own money for business-related expenses. ![]()
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