Accountable plan: repaying yourself for business expenses

Why an S-corp owner needs one

Owners often pay a business cost themselves: a phone bill, mileage, a work trip. Once you are an employee of your S corporation, how the corporation repays you matters. Paid under an accountable plan, the repayment isn’t wages and carries no income, Social Security, Medicare or FUTA tax. Paid without one, it is treated as wages.

The three rules

To be an accountable plan, the arrangement must require the employee, here you, to meet all three rules:

• A business expense. You paid or incurred an allowable expense while performing services as the corporation’s employee. The repayment must be for the expense, not an amount that would otherwise have been paid to you as wages.
• Proof within a reasonable time. You substantiate the expense to the corporation within a reasonable period of time.
• Return any excess. You return any amount above the substantiated expenses within a reasonable period of time.

What counts as a reasonable time

It depends on the facts and circumstances. Generally it is reasonable if an advance comes within 30 days of the time you pay or incur the expense, you account for the expense within 60 days after it was paid or incurred, and you return any excess within 120 days after it was paid or incurred.

If the rules aren’t met

Any amount not substantiated, or any excess not returned within a reasonable period, is treated as paid under a nonaccountable plan. It is subject to income, Social Security, Medicare and FUTA taxes for the first payroll period after the reasonable period ends.

Keeping it clean

• Put it in writing. The arrangement must require the three rules, so set them down as the corporation’s plan.
• Keep the receipts. The proof is what makes the repayment tax-free.
• Pay it separately. If one payment includes both wages and a reimbursement, the corporation must state the reimbursement amount. A separate payment keeps it clear.

How to pay yourself covers salary and distributions, the other two ways money leaves the business to you.

Sources

• IRS Publication 15 (2026), Employer’s Tax Guide: Accountable plan

Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An explanation of public rules, not tax advice.