It is essential to reimburse yourself and your employees the right way. Having an accountable plan in place that follows IRS regulations benefits both a business and its employees by maximizing deductions and minimizing taxes. It allows for tax-free reimbursement of business-related expenses to officers and employees while being 100% tax-deductible for your business.
What Businesses Benefit from an Accountable Plan?
Most businesses benefit from accountable plans, but single-member LLCs with no employees don't since all their business expenses are already deductible. However, as soon as they hire their first employee, they may need one, depending on the circumstances. Additionally, once an accountable plan is established, it is best to mention it in the company's minutes.
What expenses can be included in an accountable plan?
Officer vehicles that are not titled in the business name and are regularly used for business purposes.
Mileage reimbursements for employees.
The use of home office space or storage, not to exceed 300 square feet via IRS guidelines.
Equipment, computers, office supplies, telephone expenses, business meals, business gifts, travel expenses, etc.
Important Guidelines to Follow:
The expenses MUST be business-related, and all receipts MUST be given to the employer within 60 days that the expenditure incurred to be considered substantiated within a timely manner via the IRS guidelines (Safe Harbor). Additionally, the excess of any advances given to an employee MUST be returned to the company within 120 days after the expense was paid. Furthermore, it is vital to retain receipts and keep a log the following details for each reimbursable expense:
The total amount of the expense and where it was purchased from.
The time and place of the business meal, travel expense, or a description of the business gift.
The business purpose of the business related expense.
The business relationship of the individual receiving the benefit.
Is your business in need of an accountable plan? If so, I would be happy to assist you set one up the right way! I offer accountable plan set-up and accountable plan management services. Contact me today! I am an Advanced Certified QuickBooks ProAdvisor and specialize in working with clients who have QuickBooks Online, QuickBooks Desktop (Windows), QuickBooks Enterprise, and QuickBooks Premier. Located in Murrieta, CA, and servicing clients nationwide!