Expense Reimbursement Plans

Companies may institute "accountable" or "nonaccountable" 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 can deduct the reimbursements in full, while employees do not report them as income or deduct related expenses.

Under nonaccountable plans, employees receive flat expense allowances. The employee must declare the allowance as income, while expenses are taken as miscellaneous itemized deductions, subject to the 2% of AGI deduction floor. The employer may also owe FICA on the allowances.

If your company's reimbursement plan hasn't been reviewed lately, now is a good time to so.