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What is an accountable plan and why would my S-corp need one?

An accountable plan is a formal arrangement that lets your business reimburse you (or employees) for business expenses you paid personally — like a home office, mileage, or supplies — without that reimbursement being treated as taxable income. It matters most for S-corp owners, because once you're an employee of your own S-corp, you generally can't deduct unreimbursed employee business expenses on your personal return the way a sole proprietor can on Schedule C. The accountable plan fixes that: the corporation reimburses you, deducts the expense, and the money is tax-free to you. To qualify, expenses must have a business connection, be substantiated with records (receipts, mileage logs) within a reasonable time, and any excess advance must be returned. Set up a simple written policy and submit periodic expense reports. Without one, those expenses can be lost.

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