Save Money and Stay Compliant: The Benefits of an Accountable Plan

As an S Corporation owner, you are always looking for ways to maximize tax savings while ensuring compliance with IRS regulations. One of the most effective strategies to achieve this is by implementing an accountable plan.

What is an Accountable Plan?

An accountable plan is a formal reimbursement arrangement. It allows your S Corp to reimburse employees, including yourself as an owner-employee, for legitimate business-related expenses. These expenses may include mileage, travel, and home office costs. Reimbursements made under this plan are not considered taxable income.

To qualify as an accountable plan, your reimbursement policy must meet three IRS requirements:

1. Business Connection - Expenses reimbursed must have a direct business purpose.
2. Substantiation - Employees must provide documentation (e.g., receipts, mileage logs) to verify the expenses.
3. Return of Excess Payments - Any excess advance payments must be returned to the company within a reasonable timeframe.

Why is it Important for S Corp Owners?

1. Tax-Free Reimbursements - Reimbursements under an accountable plan are not considered taxable income for the employee, nor are they subject to payroll taxes. This allows you to save on both personal and business taxes.
2. Avoid Double Taxation on Expenses - If you personally pay for business expenses without an accountable plan, you are essentially paying taxes twice. First, you pay taxes on the income used to cover the expenses, and then you lose out on the ability to deduct those costs properly.
3. IRS Compliance - An accountable plan ensures that your reimbursements align with IRS guidelines, reducing the risk of audits or penalties for misclassified expenses.
4. Clean Recordkeeping - A written accountable plan simplifies tracking and substantiating expenses, keeping your financials organized and audit-ready.

How to Set Up an Accountable Plan

Setting up an accountable plan is straightforward and highly beneficial for your S Corp:

• Draft a Written Policy - Outline eligible reimbursable expenses and procedures. We can provide you with a template to get started.
• Communicate the Plan - Inform all employees about the reimbursement policy and ensure they understand the process.
• Implement an Expense Documentation System - Establish a reliable system for submitting, approving, and storing expense records.

To help you get started, you can download our customizable template that serves as a foundation for your accountable plan. This will allow you to tailor the policy to your business’s specific needs.

Take Action Today

Don’t leave money on the table or risk non-compliance! Establishing an accountable plan is a simple yet powerful way to protect your S Corp and maximize your tax savings.

Get Started:

1. Download the Accountable Plan Template (provided for your convenience).
2. Fill in the required details, including:
   • Company Name
   • Address
   • Phone Number
   • Shareholder details and applicable business expenses (e.g., home office, meals, cellphone).
3. Review the agreement, ensuring all required information is complete and accurate.
4. Sign and date the document where indicated.

If you have any questions, feel free to email us at tax@club.capital. We’re here to help you optimize your tax strategy and ensure IRS compliance!

Download the S Corp Accountable Plan

To help you get started, you can download our customizable template (below) that serves as a foundation for your accountable plan. This will allow you to tailor the policy to your business’s specific needs.

Use this form to get your S Corp Accountable Plan!