United States: Tips For A Valid Accountable Plan

Last Updated: January 23 2015
Article by Margaret Swain

Principals of good financial management call for having a valid accountable plan for employee expense reimbursements for all businesses or organizations, whether for-profit or not-for-profit. The IRS lists three rules for a reimbursement or allowance arrangement which all must be met in order for the plan to qualify as an accountable plan. They can be summarized as follows:

  1. Expenses must have a business connection;
  2. Expenses must be adequately accounted for within a reasonable period of time; and
  3. Any excess reimbursement or allowance must be returned within a reasonable period of time.

These rules make sense and should be applied in any case to assure that employee expense reimbursements are for verifiable, legitimate business purposes. The challenges of running a not-for-profit organization make them even more necessary. Without clear policies and procedures in place, your organization could come under scrutiny from the board of directors, donors or other oversight agencies for irregular or unsubstantiated expenditures. Although we do not like to think about it, the potential for fuzzy or even fraudulent expenditures must be avoided to prevent costly and damaging abuses. And per the IRS, if the criteria for an accountable plan are not met, reimbursements to employees would have to be reported as taxable earnings on their form W-2.

To protect your organization and to be in compliance with the IRS, here a few tips for a valid accountable plan:

Have a Real Plan – While an accountable plan is not required to be in writing, a formally established plan makes it easier for your organization to prove its validity to the IRS if ever challenged. A written plan also can provide guidelines and requirements for expense reimbursements, making it easier for employees understand and comply, and for management to enforce.

Make Sure the Expense is Reasonable — According to the IRS, expenses that are reimbursable under an accountable plan should be "ordinary," meaning common and accepted in your trade or business and "necessary," defined as helpful and appropriate. Not-for-profit organizations, especially smaller ones, may need to specify limits as to what may be spent on discretionary expenses such as entertainment and travel. Some contributors may not appreciate knowing that their unrestricted contribution was used to pay for a trip to a luxury resort for staff and spouses. But an organization hosting a Nobel Laureate would not expect an honored guest to stay at a cheap motel either. Anticipated expenses should have been included in the budget, and reimbursement requests should be reviewed and approved by a supervisor.

Account Adequately for the Expenses — The IRS requires that these records are kept for business expenses that are reimbursed:

  • The amount of the expense and the date;
  • The place of the travel, meal or transportation;
  • The business purpose of the expense; and
  • The business relationship of the people entertained or fed.

Reimbursements should not be processed without the supporting documentation. Actual receipts for expenses including transportation, meals, lodging and other incidentals should be submitted with the reimbursement request, unless your organization uses a per diem plan in lieu of direct reimbursement. Credit card statements may be used to provide key elements of the documentation, such as the place and date of the expense but employees must supplement the statement with documentation of other elements and additional information.

Additionally, employees should be given a time-frame or deadline to request reimbursement and submit proper documentation.  IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses, provides guidelines for what could be considered reasonable amounts of time. For further information regarding per diems rates, see IRS Publication 1542, Per Diem Rates, which includes the IRS per day amounts for combined meal and lodging expenses. When using a per diem for travel — or mileage for vehicle usage — an employer may adopt a lower amount than the IRS maximum.

Keep Track of Mileage — A travel log, diary or similar record may be used to substantiate a vehicle's business use. Printing directions from a computer map application can provide a fairly accurate total of the miles traveled. For 2015, mileage can be reimbursed up to 57.5 cents for every mile driven in personal vehicles for business purposes (56 cents per mile in 2014).

Reimburse Correctly – Obviously, the amount spent is the amount that should be reimbursed. If advances have been given, a full accounting of how the funds were spent must be submitted. If the total advance was not spent or cannot be accounted for, the excess should be returned to the organization – otherwise that amount is considered taxable earnings to the employee and must be reported on their form W-2 as compensation. Alternatively, an employee's compensation should not be reduced by the amount of reimbursements for qualified expenses.

Complying with the IRS guidelines is essential, but it is also in an organization's best interest to provide timely and accurate reimbursement of employee business expenses from accurate and complete records. Employees should be discouraged from using personal funds for business expenses to the extent possible. Cash poor organizations sometimes rely on individual employees to use their own money to fill in funding gaps. This can cause strain over time, which can lead to bad habits.  For example,  an employee who feels taken advantage of may resort to reimbursing themselves in a very unqualified fashion. An organization's funds should never be used for anything remotely resembling personal expenses. Extreme care and meticulous recordkeeping is a must if combining business trips with personal vacations. With common sense, basic oversight and control, your organization can conform to IRS guidelines and protect your hard earned funds for your charitable purposes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Margaret Swain
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.