What is a Non-accountable expense reimbursement plan?
A non-accountable plan is any employer reimbursement arrangement that fails IRS accountable plan requirements. These include a clear business connection, adequate expense substantiation within 60 days, and return of excess reimbursements within 120 days. When a plan fails to meet these standards, all reimbursements are treated as taxable wages and added to the employee's gross income. Both employer and employee owe payroll taxes on each reimbursed dollar. Business owners who use Home office or vehicle reimbursements without a compliant written plan default to this treatment, thereby losing significant tax savings.
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