An accountable plan is an IRS-approved method for employees to be reimbursed for business expenses that they have paid personally. The most common use of an accountable plan is for reimbursing employees and business owners for business mileage and benefits provided under a physician’s contract.
Under an accountable plan, the employee keeps records of work-related expenses paid out of pocket. Logging work-related mileage and receipts for CME costs are two good examples. The employee submits the information to the employer for reimbursement on a periodic basis. The business cuts a check to the employee and the amount is deductible to the business but not taxable to the employee. Win-win!
An accountable plan can also be used to submit receipts for reimbursement of meals and entertainment, home office expenses, business supplies, or any OOP expenses that the employer has agreed to include in the plan and reimburse. These expenses should be considered “ordinary and necessary” for the business, such as for business driving and non-taxable employee fringe benefits.
In prior years, employees who itemized could deduct employee business expenses that exceeded 2% of their AGI. Obviously, this is a threshold that doctors rarely meet, except in residency/fellowship. And, beginning in 2018, job-related business expenses you pay OOP are no longer deductible.
When considering employment, having access to an accountable plan can be a point of negotiation. Ask if one is in place – not all practices are aware of the rules for accountable plans.
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