Expense Reimbursement Plans

Companies may institute “accountable” or “non-accountable” expense reimbursement plans. Generally, accountable plans better serve both the employer and employee. Under accountable plans, employees submit mileage logs or actual expense receipts for which they are reimbursed at the standard mileage rate or for actual expenses. The company deducts the reimbursements in full, and employees do not report them as income or deduct related expenses.

Under non-accountable plans, employees receive flat expense allowances. Employees must declare the allowance as income, and the expenses are taken as miscellaneous itemized deductions, subject to the deduction floor. The employer may owe FICA on the allowances.