What is an Accountable Plan?
An accountable plan is a reimbursement arrangement that allows businesses to reimburse employees for legitimate business expenses without the payments being treated as taxable wages. To qualify, the plan must meet three requirements: expenses must have a business connection, employees must adequately account for expenses within a reasonable time (typically 60 days), and excess reimbursements must be returned within a reasonable time (typically 120 days). Corporations commonly use accountable plans to reimburse employee-owners for Home office expenses, vehicle costs, travel, and meals, creating tax deductions for the business while providing tax-free reimbursements to employees.
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