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The Accountable Plan Playbook

An accountable plan is how a business pays its owner back for business expenses paid personally, with no tax on the money coming back and a full deduction for the company. It is a short document and a monthly habit. This playbook covers the two reimbursements that matter most, mileage and the home office, and the others worth adding.

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Can I do this myself?

Once a qualified tax advisor helps you properly establish the accountable plan, the ongoing process is something you can and should manage yourself. Keep your mileage log, track eligible expenses, and submit your expense report each month. Have your tax advisor review the plan annually and help with any changes or questions.

Helpful resources
Tool

Mileage Reimbursement Calculator

Turn your monthly mileage total into the exact reimbursement at the current IRS rate.

Jump to step 03
Tool

Home Office Reimbursement Calculator

Enter square footage and home expenses to get the business-use percentage and the reimbursement.

Jump to step 04
Free reminders

Join the Network

Get a heads-up when the mileage rate changes, when the monthly report is due, and when the annual review comes around.

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Who this is for

An accountable plan only matters when there is a business on one side and a person being reimbursed on the other. If you and the business are the same taxpayer, there is nothing to reimburse.

A good fit

  • S-corp owners who pay themselves a W-2 wage
  • C-corp owners and any business with employees who spend their own money on the business
  • Owners who work from home and drive their personal car for the business
  • Partnerships and multi-member LLCs reimbursing employees (partners are handled differently)
  • Anyone who has been paying business expenses out of pocket and never getting them back
This is the only way an S-corp owner gets a home office deduction. Since the business can't put it on your Schedule C and it can't go on your personal return, the company has to reimburse you for it.

A different playbook

  • Sole proprietors and single-member LLC owners (you deduct these directly on Schedule C)
  • Partners in a partnership (unreimbursed partner expenses follow their own rules)
  • Expenses the business already pays directly from its own account
  • A car or phone the business owns and pays for itself
A sole proprietor with employees can still adopt a plan for them. It just doesn't do anything for the owner.

How an accountable plan works

The IRS has one framework for reimbursing employees, and it has three rules. Meet all three and the money is invisible to your personal return. Miss one and the reimbursement is wages.

Rule one: business connection
The expense has to be ordinary and necessary for the business and paid while doing the business's work. Commuting, personal errands, and the family phone plan don't qualify.
Rule two: substantiation
You prove what, when, where, how much, and why before the business pays you back. A mileage log, receipts, and a signed expense report are the standard. The IRS safe harbor is to substantiate within 60 days of the expense.
Rule three: return of excess
Any advance or reimbursement above what you substantiated goes back to the business. The safe harbor is 120 days. Keeping the extra turns the whole payment into wages.
The tax result
The business deducts the reimbursement. You receive it with no income tax, no payroll tax, and nothing on your W-2. For an S-corp owner, that beats taking a distribution or a raise every time.
Without a plan
The same reimbursement is taxable wages, subject to withholding and both halves of payroll tax. And you can't deduct the expense yourself, since unreimbursed employee expenses aren't deductible on a personal return.
What it costs
A written plan, a monthly expense report, and a log you actually keep. No filing, no fee, no separate return. The cost is the discipline.

Red flag checks

Each of these quietly converts a tax-free reimbursement into taxable wages, or invites a question you can't answer.

No written plan

Reimbursing yourself without a document that says how and when is a distribution with a story attached. The plan is what makes the payment a reimbursement instead of a draw or a wage.

A flat monthly allowance

A fixed amount for "car" or "phone" with no log or receipts behind it fails the substantiation rule. Allowances without proof are wages, no matter what the plan calls them.

Reimbursing the commute

Driving from home to a regular workplace is personal. It only becomes business mileage when your home office is your principal place of business, which is one reason the two reimbursements belong together.

The log built in April

A mileage log reconstructed from memory at tax time is the first thing an examiner disallows. The log has to be kept as you go. Weekly is fine. Monthly is the outer limit.

Double-dipping the home

Mortgage interest and property tax the business reimbursed are no longer yours to itemize. Reimburse them or deduct them personally, not both.

Running the plan on the wrong entity

A sole proprietor writing an expense report to themselves accomplishes nothing. If the business is you, the deduction already belongs on Schedule C. The plan is for entities that pay you as an employee.

Running the play

In order. The first two steps are a one-time setup. The rest repeat every month, and the calculators do most of the arithmetic.

01 Confirm the plan applies to youEntity first, expenses second
  • You need a business that pays you as an employee, usually an S-corp or C-corp, or a business with staff to reimburse.
  • Make a list of everything you've been paying personally for the business. That list is the plan's starting scope.
  • If you're an S-corp owner working from home, the home office is only available through this plan. Don't skip it.
Pitfalls
  • Setting one up as a sole proprietor. Deduct directly instead. The plan adds paperwork and changes nothing.
  • Assuming the S-corp election created a plan. It didn't. The plan is a separate document the company adopts.
02 Adopt the written planOne page, signed once, kept with the entity records
  • The document states the three rules: business connection, substantiation, and return of excess, with the deadlines for each.
  • List the categories the plan covers and how each is measured: mileage at the IRS standard rate, home office by business-use percentage, everything else at actual cost with a receipt.
  • Adopt it by a signed resolution of the shareholders or members, dated. Reimbursements before that date are on shakier ground.
Pitfalls
  • Copying a template without reading it. If it names expense types you don't reimburse or leaves out the ones you do, it undercuts you.
  • Never showing it to anyone. A short review by your tax advisor is cheap, and this is the document an examiner asks for first.
03 Keep the mileage logPersonal car, business miles, IRS standard rate
  • Record every business trip: date, destination, purpose, and miles. An app that tracks automatically is fine. A notebook in the glovebox is fine. Memory is not.
  • Reimburse at the IRS standard mileage rate, which changes each year. It already includes gas, maintenance, insurance, and depreciation, so those aren't reimbursed separately.
  • Note your odometer at the start and end of the year. Total miles versus business miles is the first thing a reviewer wants to see.
Pro tip: total your log each month and run it through the Mileage Reimbursement Calculator to get the exact reimbursement at the current rate.
Pitfalls
  • Logging the commute. Home to a fixed office is personal unless the home office is your principal place of business.
  • Reimbursing gas on top of mileage. The standard rate already covers it. That's a double reimbursement, and the second one is wages.
  • Mixing a business-owned vehicle into this. A car the company owns and pays for is a different calculation with its own rules.
04 Compute the home office reimbursementRegular and exclusive use, measured in square feet
  • The space has to be used regularly and exclusively for the business. A dedicated room qualifies. The kitchen table doesn't.
  • Divide the office square footage by the home's total square footage. That business-use percentage applies to rent or mortgage interest, property tax, utilities, insurance, HOA dues, and repairs.
  • Submit it monthly or quarterly like any other expense, with the underlying bills attached. The company deducts it. You receive it tax-free.
Pro tip: enter your square footage and home expenses in the Home Office Reimbursement Calculator to get the business-use percentage and the reimbursement amount in one pass.
Pitfalls
  • Still itemizing what the business paid you for. The reimbursed share of mortgage interest and property tax comes off Schedule A.
  • Reimbursing depreciation without a plan for the sale. Depreciation the business reimburses can come back as recapture when you sell the house. Many plans leave it out. Ask before you include it.
  • A space that's exclusive on paper only. If it doubles as a guest room, the reimbursement is exposed.
05 Add the other reimbursementsSmaller individually, meaningful together
  • Cell phone and home internet at a documented business-use percentage.
  • Travel: airfare, lodging, rental cars, parking, and tolls. Meals on the road at actual cost or the federal per diem rate.
  • Client and business meals, with who, why, and the receipt. The company's deduction is limited, but your reimbursement is still tax-free in full.
  • Supplies, software, dues, and continuing education you bought on a personal card because it was easier that day.
Pitfalls
  • Reimbursing the whole phone bill. The personal share is wages. A defensible percentage is the whole game.
  • Receipts that don't say what the expense was for. A charge on a statement isn't substantiation. Write the purpose on it.
  • Reimbursing something the business already paid. Check the company card before submitting.
06 Submit, approve, and payMonthly, from the business account, with the report attached
  • Fill out an expense report listing each item, the amount, and the category. Attach the mileage total, the home office worksheet, and the receipts. Sign and date it.
  • Pay it from the business account to your personal account as one transfer, referenced to the report. Not through payroll. Not as a distribution.
  • Keep the report and its backup with the company's books for as long as you keep the return it supports.
Pitfalls
  • Paying yourself first and documenting later. The order matters. Substantiate, then reimburse.
  • One catch-up reimbursement in December. Expenses from early in the year are past the safe harbor window. Monthly or quarterly avoids the question entirely.
  • Swiping the business card for personal items and calling it a wash. That's commingling, and it's a separate problem with its own consequences.
07 Book it correctlyAn expense on the company's books, nowhere on your W-2
  • Record each reimbursement to the matching expense account: vehicle, office, telephone, travel, meals. Not to owner distributions and not to shareholder loans.
  • Accountable plan reimbursements are not wages, so they don't run through payroll and don't appear on the W-2 at all.
  • Tell your payroll provider and your bookkeeper the plan exists, so nobody helpfully reclassifies the transfers.
Pitfalls
  • Coding it as a distribution. The company loses the deduction and the S-corp's basis math gets distorted.
  • Deducting meals in full on the company return. Your reimbursement is tax-free in full. The company's deduction is still limited.
08 Review the plan every yearRates change, homes change, cars change
  • Update the mileage rate each January and re-measure the home office percentage after a move, a renovation, or a change in how the space is used.
  • Re-read the plan against what you actually reimburse. New categories go in the document, not just on the expense report.
  • If the business bought a vehicle, added staff, or changed entity type, the plan needs a second look before the next reimbursement.
Free reminders: join the network and we'll send you a heads-up when the mileage rate changes, when each month's expense report is due, and when it's time for the annual review.
Pitfalls
  • Reimbursing at last year's rate. Under-reimbursing leaves money on the table. Over-reimbursing creates wages.
  • Letting the plan drift from the practice. A plan that says one thing while the reports show another is worse than no plan in an examination.

You can run this one yourself.

Adopt the plan, keep the log, submit the report, pay from the business account. Bring in your tax advisor for the plan document and the home office math. Join the network and we'll keep the reminders coming for free.

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This playbook is general educational information, not tax, legal, or accounting advice, and it does not create a professional relationship. Accountable plan rules turn on your entity type, your plan document, your records, and the specific expenses involved. Consult a qualified tax professional before making or relying on any of the decisions described here.

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