What is an accountable plan, and do you need one?
An accountable plan is a written company policy that lets your S-Corp reimburse business costs you paid personally, tax-free. It needs a business reason, records and repayment of any excess. Without one, reimbursements count as wages. It's how S-Corp owners usually recover home office, mileage and phone costs.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- Needs. Business purpose, records and return of excess
- Tax result. Not wages to you, deductible to the company
- Typical uses. Home office, mileage, phone, internet
Why do S-Corp owners need one?
As an S-Corp owner who works in the business, you're an employee. Employees can't deduct unreimbursed expenses on a federal return. So if you pay for your home office or mileage personally, you lose the deduction, unless the company reimburses you. Without an accountable plan, that reimbursement is taxable pay.
What are the IRS rules?
An accountable plan has to meet three tests.
- Business connection. The expense was paid while working for the company.
- Substantiation. You give the company records within a reasonable time, generally 60 days.
- Return of excess. You repay any advance above what you spent, generally within 120 days.
If the plan fails, the payments become wages, with payroll tax.
What can you get reimbursed?
| Expense | How to figure it |
|---|---|
| Home office | Business percentage of rent or mortgage interest, utilities, insurance |
| Mileage | IRS rate, 72.5 cents to June, then 76 cents, for 2026 |
| Phone and internet | Reasonable business share |
| Travel and meals | Actual costs, or per diem with limits |
| Supplies and software | Actual cost |
For a home office, reimbursement is usually based on actual costs, not the $5 simplified method.
How do you set one up?
- Write a short policy, adopted by the company.
- Keep it in your corporate records.
- Submit a monthly or quarterly expense report, with receipts.
- Have the company pay you from the business account.
- Book it as an expense, and leave it off your W-2.
It doesn't get filed with the IRS. You just need it in place, and to follow it.
What are the common mistakes?
- Paying reimbursements with no report or receipts
- Doing it all once, in December of the following year
- Taking a personal deduction, as well as the reimbursement
- Paying yourself a flat allowance, whatever you spent
This is a small piece of paper that can give back a few thousand dollars a year. If you've elected S-Corp status and don't have one, get it done before year end.
Sources
General information, not tax advice for your situation.
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See our tax planning and CFO serviceDoes an accountable plan need to be in writing?
The IRS rules don't strictly require a written plan, but a written policy is strongly advised and gives you something to show.
Can a sole proprietor use an accountable plan?
No need. Sole proprietors deduct those costs straight on Schedule C.
Can I reimburse myself for past expenses?
It depends on timing. Reimbursements should happen within a reasonable time of the expense.
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