Have you ever paid for a business expense with your personal credit card or out of your own pocket?

If you're like many business owners, the answer is probably yes.

The good news is that you may be able to have your business reimburse you for those expenses tax-free—if you have an Accountable Plan in place.

What Is an Accountable Plan?

An accountable plan is an IRS-approved reimbursement arrangement that allows a business to reimburse employees—including shareholder-employees of an S corporation—for legitimate business expenses they paid personally.

When the rules are followed:

• The business generally deducts the expense.

• The reimbursement is generally not taxable to the employee.

• The reimbursement is not subject to payroll taxes.

It's a simple strategy that can help keep your business records accurate while ensuring you're not personally absorbing business costs.

What Expenses Can Be Reimbursed?

Depending on your situation, an accountable plan may allow reimbursement for qualifying business expenses such as:

• Business mileage

• Office supplies

• Professional dues and memberships

• Continuing education

• Business meals (when allowable)

• Cell phone expenses used for business

• Internet expenses related to business use

• Home office expenses (when appropriate)

• Postage and shipping

• Software subscriptions

Not every expense qualifies, so it's important to review your specific situation with your tax advisor.

Three Requirements for an Accountable Plan

To qualify, the IRS requires that reimbursements meet three basic rules:

1. The Expense Must Have a Business Purpose

The expense must be ordinary and necessary for your business.

Personal expenses cannot be reimbursed under an accountable plan.

2. You Must Properly Document the Expense

Keep records such as:

• Receipts

• Invoices

• Mileage logs

• Dates

• Business purpose

• Amount paid

Good documentation protects both you and your business.

3. Excess Reimbursements Must Be Returned

If your business reimburses more than the actual business expense, the excess amount should generally be returned.

Why Is This Especially Important for S Corporation Owners?

Many S corporation owners pay business expenses personally without realizing there is a better way.

Instead of simply absorbing those costs, an accountable plan allows the corporation to reimburse qualifying business expenses while keeping the reimbursement separate from wages.

This can help maintain cleaner books and ensure legitimate business expenses are properly recorded.

Common Mistakes We See

Some common errors include:

Paying business expenses personally and never seeking reimbursement

Mixing personal and business expenses

Not keeping receipts or mileage logs

Assuming every personal expense qualifies

Waiting until tax season to reconstruct records

Proper bookkeeping throughout the year makes reimbursements much easier and more accurate.

Why This Matters

An accountable plan is about more than tax savings. It’s about creating good financial habits.

By reimbursing business expenses correctly, you can:

• Keep personal and business finances separate

• Improve the accuracy of your bookkeeping

• Properly document business deductions

• Reduce confusion at tax time

• Strengthen your financial records in the event of an IRS examination

Final Thoughts

Many business owners are leaving money on the table simply because they don't have an accountable plan in place.

If you're paying for business expenses out of your own pocket, it may be time to review how those expenses are being handled.

At Maverick Tax & Bookkeeping Services, we help business owners implement tax strategies that are both practical and compliant. From accountable plans to year-round tax planning and bookkeeping, we're here to help you make informed financial decisions.

Not sure if your business should have an accountable plan? Let's schedule a tax planning consultation and determine the best approach for your business.

Have more questions? Get in touch