The Accountable Planis one of our most successful strategies and gives up to $10K in tax savings per year.
An Accountable Plan allows employees and in your case, owner-employees tobe reimbursed for business expenses paid out of pocket.
The expenses becomedeductions to the business and the employee or employee-owner can bereimbursed creating non-taxable cash flow to them.
In order for the plan to be a “Qualified Accountable Plan” it must have the following connection points: ·Business Connection ·Substantiation (Expense Reports - with receipts) ·No Excess Payments ·Timeliness (30 - Day Rule)
If not disbursed under an accountable plan, the paymentscould be considered additional wages by the IRS. For this reason, you need an accountant familiar with the accountable plan for the initial setup.
Examples of expenses that qualify are mileage, auto, home office, travel, meals & entertainment expenses.