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This page is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for guidance specific to your situation.
At Rapacz CPA Tax & Accounting Services, we specialize in helping business owners implement effective Accountable Plans that ensure your expenses are reimbursed tax-free. Our expert team guides you through the process, allowing your business to:
- Reimburse employees without payroll tax implications
- Keep personal and business expenses separate for clearer accounting
- Claim deductions that could save you thousands annually
We are dedicated to helping you navigate the complexities of tax regulations while maximizing your financial outcomes.
What Is an Accountable Plan?
An Accountable Plan is an IRS-approved reimbursement arrangement that allows your business to pay you back for legitimate business expenses — without that money being treated as taxable income. When set up correctly, your business deducts the expense AND you receive the reimbursement tax-free. No payroll taxes. No income tax. Just clean, compliant savings. Without an Accountable Plan, any reimbursements your business pays you may be treated as additional wages — triggering income tax AND self-employment tax. That's a costly mistake many business owners don't catch until it's too late.
An Accountable Plan is especially valuable for:
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S-Corporation owners who use personal funds for business expenses
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Single-member LLCs and sole proprietors with a spouse on payroll
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Business owners who work from home and want to deduct home office costs
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Entrepreneurs who use a personal vehicle for business purposes
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Any business owner reimbursing themselves or employees for out-of-pocket costs
If any of these apply to you, you may be leaving significant tax savings on the table every year.
Who Needs an Accountable Plan?
For a plan to qualify as "accountable," it must meet three rules:
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Business Connection — The expense must have a legitimate business purpose.
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Substantiation — You must document the expense with receipts, dates, and business purpose.
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Return of Excess — Any advances over actual expenses must be returned to the business.
We help you set this up correctly from the start — so you stay compliant and audit-ready.
The Three IRS Requirements
How Much Can You Save?
The savings depend on your specific situation, but here's a realistic example:
Example Scenario
Home office reimbursement: $3,600 / year
Cell phone (business portion): $720 / year
Vehicle mileage (5,000 miles): $3,400 / year
Internet (business portion): $600 / year
Total Annual Reimbursements: $8,320
At a combined federal + self-employment tax rate of 35–40%, that's $2,900–$3,300 in tax savings per year — from one simple plan.
What Expenses Can Be Reimbursed?
Under an Accountable Plan, your business can reimburse a wide range of ordinary and necessary business expenses, including:
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Home office use (dedicated workspace in your home)
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Business mileage and vehicle expenses
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Cell phone and internet (business-use portion)
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Meals and travel for business purposes
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Office supplies, equipment, and software
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Professional development and education
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Tools and materials used in your work
Home Office Reimbursements Under an Accountable Plan
One of the most valuable benefits of an Accountable Plan is the ability to reimburse qualifying home office expenses. If part of your home is used regularly and exclusively for business, your S Corporation may be able to reimburse a portion of:
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Mortgage interest
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Property taxes
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Utilities
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Insurance
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Repairs
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Internet service
The reimbursement is generally deductible by the corporation and tax-free to the shareholder-employee when properly documented.
Business Mileage Reimbursements
Many business owners fail to track deductible mileage throughout the year.
Examples of qualifying mileage may include:
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Client meetings
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Supply runs
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Bank deposits
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Travel between business locations
Generally, commuting from home to a regular office location is not reimbursable.
Proper mileage logs should include:
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Date
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Destination
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Business purpose
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Miles driven
Do I need a written plan?
Yes. A written Accountable Plan helps establish formal reimbursement procedures and provides important support if the IRS ever questions your reimbursements.
Can I set this up mid-year?
Yes. An Accountable Plan can be implemented at any point during the year. However, only expenses incurred after the plan is established can be reimbursed under it.
What if I'm already paying myself back for expenses?
If you've been reimbursing yourself without a formal plan in place, those payments may have been taxable.
Is this only for S-Corps?
No. While S-Corp owners benefit the most (due to self-employment tax savings), Accountable Plans can be used by any business entity that has employees
Can an Accountable Plan reduce payroll taxes?
Yes. Because reimbursements are generally not treated as wages, they are typically not subject to payroll taxes.
What expenses qualify for reimbursement?
Common examples include home office expenses, mileage, cell phone costs, internet service, software subscriptions, meals, travel, and office supplies.
What records should I keep?
Keep receipts, mileage logs, invoices, and documentation showing the business purpose of each expense.
How often should I submit reimbursements?
Many business owners submit reimbursements quarterly to keep documentation current and avoid year-end recordkeeping issues.
Pay business expense personally
Keep documentation
Submit reimbursement request
Corporation reimburses shareholder/employee
Expense recorded by corporation
How an Accountable Plan Works
Why Work with Rapacz CPA?
We don't just hand you a template. We:
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Review your current business structure and expenses
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Draft a written Accountable Plan policy tailored to your business
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Set up a reimbursement tracking system you'll actually use
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Ensure your documentation meets IRS standards
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Integrate the plan into your broader tax strategy for maximum savings
We've helped business owners across Northeast Ohio and USA to eliminate unnecessary tax liability — and we can do the same for you.