deductible business expense

Accountable Plans and the IRS

In a 2010-2012 audit initiative, the IRS found many businesses were either not familiar with the accountable plan rules, or were not following them. It seems likely, therefore, that the IRS is going to apply more scrutiny to the issue of accountable plans when auditing businesses and their owners.

An accountable plan is a business plan for expense reimbursement or advances that satisfies the following requirements:

(1) Reimbursements/advances are only made for deductible business expenses incurred in the performance of employee duties;

(2) Reimbursements/advances are substantiated through an expense report, diary, log, trip sheets, or similar record such as a detailed receipt;

(3) Excess advances are returned to the business (except for cases where an allowance doesn’t exceed per diem rates); and

(4) Substantiation and returns of […]