Accountable Plan

An accountable plan is a plan that follows IRS regulations for reimbursing workers for business expenses in which reimbursement is not counted as income. This means that reimbursements are not subject to withholding taxes or W-2 reporting.

An accountable plan differs from a non-accountable plan. If a business' reimbursement plan does not follow IRS requirements for an accountable plan, the plan is non-accountable, and reimbursement for expenses is considered part of the employee's compensation and therefore is subject to withholding and must be reported on an employee's W- form.

According to IRS rules, under an accountable plan, expenses are reimbursed if they are business-related and can be substantiated. In addition, amounts paid in excess of actual costs must be returned to the company. Business-related expenses incurred by employees can include such things as travel, meals, lodging, entertainment, transportation, or many other costs. Employees are required to account adequately for expenses with records and to return any excess reimbursement within a reasonable period of time.

Employers are not required to submit the details of their plan to the IRS, but they must be able to demonstrate that it meets the requirements of an accountable plan.