Accountable Expense Plan

[Burke]

Have a client who is the sole employee of a S-Corp with an Accountable Plan for Expenses. In the past, he has calculated his auto business expense using the current IRS rate per mile at the end of the year for reimbursement from the company. But because he has paid certain auto expenses (mostly gas) on a company credit card throughout the year, and it shows up on the P&L, he has subtracted the total of those expenses from his mileage reimbursement amount. Is this the correct way to handle this?

[TaxGuyBill]

with an Accountable Plan for Expenses. ... at the end of the year for reimbursement

First, that needs to be corrected. In order for it to be an Accountable Plan, reimbursements need to be paid within a reasonable amount of time, generally within 60 days of the expense. While the 60 days is not a hard-set rule, I think annually could easily void it being an Accountable Plan.

But because he has paid certain auto expenses (mostly gas) on a company credit card throughout the year,

To me, that seems to indicate he is being reimbursed for Actual Expenses, in which case he could only be reimbursed for Actual Expenses for the entire year (not use the Standard Mileage Rate).

If the vehicle is also used for personal use, those gas payments are not being "accounted" for, it is just a random amount given to the shareholder. That could be a Nonaccountable Plan, a Distribution, or even Wages.




So the taxpayer needs to change things. Start the Accountable Reimbursements to be done monthly. Personally, I think it is too 'muddy' to have the taxpayer use the company card to pay for gas for his own vehicle, especially if there is personal use of the vehicle. I would have the taxpayer pay for everything himself, then submit the monthly Accountable Reimbursement to pay for those expenses, using either the Standard Mileage Rate or Actual Expenses (the Standard Mileage Rate is probably easier).

[Rapid Robert]

TaxGuyBill has provided a good explanation of how accountable plans are supposed to work.

In the past, he has calculated his auto business expense using the current IRS rate per mile at the end of the year for reimbursement from the company. But because he has paid certain auto expenses (mostly gas) on a company credit card throughout the year, and it shows up on the P&L, he has subtracted the total of those expenses from his mileage reimbursement amount.

What if the total gas paid by the company exceeds the mileage reimbursement for business miles? This could easily happen, say with 12,000 total miles and 2,000 business miles. His approach only comes out neutral if he also puts taxable income back into the company in this situation.