ACCOUNTABLE
PLAN
IMPLEMENTATION CHECKLIST
A step-by-step guide to establishing and maintaining an IRS-compliant accountable plan for tax-free employee expense reimbursements.
Initial Implementation
ACCOUNTABLE PLAN
ACTION ITEM | ASSIGNED TO | COMPLETED | RESOURCES / NOTES |
Draft a written accountable plan document that meets all three IRS requirements | | __ / __ / __ | Must include: (1) business connection, (2) adequate accounting within 60 days, (3) return of excess within 120 days |
Have the accountable plan reviewed by a CPA or tax attorney for compliance | | __ / __ / __ | Ensure plan language satisfies IRC §62(c) and Reg. §1.62-2; attorney-reviewed template recommended |
Adopt the plan via corporate resolution (board minutes for S-Corp/C-Corp) or written policy for LLCs | | __ / __ / __ | Board resolution template; signed by officers/members; date the plan is effective |
Create standardized expense report forms for employee/owner reimbursement submissions | | __ / __ / __ | Include fields: date, expense type, amount, business purpose, receipt attached (Y/N), employee signature |
Establish a reimbursement processing workflow (who approves, how payments are made, timeline) | | __ / __ / __ | Designate approver; set up separate GL account for reimbursements; pay via check or direct deposit |
Set up accounting categories to track accountable plan reimbursements separately from wages | | __ / __ / __ | Categories: "Employee Reimbursements — Accountable Plan"; do NOT run through payroll as wages |
Communicate plan requirements to all employees/owners who will submit expenses | | __ / __ / __ | Provide written summary of: what expenses qualify, documentation required, submission deadlines, excess return policy |
Establish a filing system to retain all expense reports, receipts, and reimbursement records | | __ / __ / __ | Cloud or physical folder per employee per year; retain for minimum 7 years |
Accountable plan: Ongoing support
ACCOUNTABLE PLAN
ACTION ITEM | ASSIGNED TO | COMPLETED | RESOURCES / NOTES |
Ensure all expense reports include adequate documentation (receipts + business purpose) before reimbursing | | __ / __ / __ | Never reimburse without itemized receipts and written business purpose; verbal explanations are insufficient |
Process reimbursements within a reasonable time after expenses are incurred | | __ / __ / __ | Best practice: reimburse within 30 days of submission; IRS safe harbor: within 60 days of expense |
Verify that employees substantiate expenses within 60 days of payment or incurrence | | __ / __ / __ | If substantiation is late, the reimbursement becomes taxable wages — must be reported on W-2 |
Collect return of any excess reimbursement (advances > actual expenses) within 120 days | | __ / __ / __ | If excess is not returned, it becomes taxable wages; enforce consistently for all employees/owners |
Record reimbursements as business expenses (NOT wages) on the entity's books | | __ / __ / __ | Accountable plan reimbursements are NOT subject to payroll taxes or W-2 reporting if plan is followed |
Do NOT include accountable plan reimbursements on employee W-2s | | __ / __ / __ | Only include on W-2 if plan requirements are violated (late substantiation, excess not returned) |
Periodically audit expense reports for compliance (spot-check receipts, verify business purpose) | | __ / __ / __ | Quarterly review recommended; flag patterns like missing receipts, vague business purpose, or excessive amounts |
Annual review with CPA to verify accountable plan compliance and proper tax treatment | | __ / __ / __ | Confirm reimbursements excluded from W-2s; review documentation completeness; update plan if needed |
Important Reminders
ACCOUNTABLE PLAN
This checklist is for informational purposes. Always consult your CPA or tax attorney for personalized advice.