Your company wants to reimburse employees for business expenses because post Tax Cuts and Jobs Act they can no longer deduct unreimbursed business expenses on their individual tax return. But did you know that a business is required to reimburse employees under an Accountable Plan in order for the reimbursed amounts not to be included in compensation (box 1 of the W-2)?
Here’s what you should know about IRS compliant Accountable Plans:
What does it mean to have an Accountable Plan?
These three requirements must all be met for a plan to be considered accountable:
What is considered adequate accounting?
Additional items to consider:
If your company is not currently reimbursing expenses under an accountable plan, these reimbursements could be considered taxable wages to your employee. Reimbursing expenses under an accountable plan also protects your associated business tax deduction. Please evaluate your current policies or ask your LUCA team member for assistance.