An accountable plan is an essential tool for S corporations looking to manage employee reimbursements effectively and ensure compliance with IRS regulations. Within this article, I have included our free S corp accountable plan template as well as an explanation how to use it to reduce your business’ taxes.

S Corp Accountable Plan Template: Click Here

What is an Accountable Plan?

An accountable plan is a reimbursement arrangement that allows businesses to reimburse S corp owners and employees for business expenses without treating the reimbursements as taxable income. To qualify as an accountable plan under IRS rules, the plan must meet three key requirements:

1. Business Connection: Expenses must have a business purpose and be directly related to the company’s operations.

2. Substantiation: Employees must substantiate expenses with receipts, invoices, and other documentation within a reasonable period.

3. Return of Excess Amounts: Any advance payments that exceed substantiated expenses must be returned to the employer within a reasonable period.

Benefits of an Accountable Plan for S Corps

Implementing an accountable plan offers several benefits for S corporations:

1. Tax Savings: Reimbursements made under an accountable plan are not reported as income to the employee, thus not subject to payroll taxes or income taxes. For the S corp, these reimbursements are deductible business expenses, which reduce the business’ taxable income. 

2. Compliance: An accountable plan ensures compliance with IRS regulations, reducing the risk of audits and penalties.

3. Employee Satisfaction: Such plans increase employee satisfaction and morale as they ensure employees are not out-of-pocket for business expenses.

Free S Corp Accountable Plan Template

Here’s a free template to help you create an accountable plan for your S corporation. You can customize this template to suit your company’s specific needs. If you would prefer a formatted word document you can Click Here. 

[Your Company Name] Accountable Plan

Purpose

The purpose of this accountable plan is to establish guidelines for reimbursing employees for business-related expenses incurred while performing their job duties.

Policy

This accountable plan applies to all employees of [Your Company Name]. The plan ensures that all reimbursements meet IRS requirements and are not considered taxable income.

Business Connection

All reimbursed expenses must have a legitimate business purpose. Examples of reimbursable expenses include:

• Travel expenses (transportation, lodging, meals)
• Office supplies and equipment
• Professional development and training
• Client entertainment and business meals

Substantiation

Employees must substantiate all reimbursed expenses by providing the following documentation:

• Receipts, invoices, or bills
• Description of the expense
• Date and location of the expense
• Business purpose of the expense

Documentation must be submitted within 60 days of incurring the expense.

Return of Excess Amounts

If an employee receives an advance payment for anticipated expenses, any excess amount must be returned to [Your Company Name] within 120 days of the expense being incurred. Employees must provide documentation for the expenses and return any excess funds.

Approval Process

All reimbursement requests must be submitted to the employee’s supervisor for approval. Once approved, the request will be forwarded to the accounting department for processing.

Record Keeping

[Your Company Name] will maintain records of all reimbursed expenses and supporting documentation for at least three years to ensure compliance with IRS regulations.

How to Implement the S Corp Accountable Plan Template

1. Customize the Template: Tailor the template to fit your company’s specific policies and procedures. Ensure that all employees understand the requirements and processes outlined in the plan.

2. Communicate the Plan: Clearly communicate the accountable plan to all employees. Provide training if necessary to ensure everyone knows how to submit reimbursement requests and the importance of providing proper documentation.

3. Monitor Compliance: Regularly review reimbursement requests to ensure compliance with the accountable plan. Address any discrepancies or issues promptly to maintain adherence to IRS regulations.

4. Keep Detailed Records: Maintain thorough records of all reimbursed expenses, including receipts, invoices, and approval documentation. This will help ensure compliance during IRS audits and support accurate financial reporting.

Conclusion

An accountable plan is a valuable tool for S corporations to manage employee reimbursements effectively and maintain compliance with IRS regulations. By using the provided free template, you can streamline your expense management processes, reduce your tax burden, and improve employee satisfaction. 

For additional guidance or to ensure your plan meets all legal requirements, consider consulting with a tax professional, CPA, or legal advisor. This will help you maximize the benefits of your accountable plan and maintain compliance with all applicable regulations.