What the heck is an accountable plan?
If you’ve recently made the leap to an S Corp, first of all: congratulations! It’s a huge milestone for your business. But with that new status comes a few new rules of the road, and one of the most common things we see solopreneurs get tripped up by is how to handle expenses they pay for personally.
If you just realized you’ve been paying for office supplies on your personal card and are wondering how to properly reimburse yourself, you need an accountable plan.
What is an accountable plan?
At its simplest, an accountable plan is just a formal policy that allows your business to reimburse you for business-related expenses you paid for with personal funds.
Because you are technically an employee of your S Corp, the IRS wants a clear paper trail showing that when the business gives you money to cover a bill, it’s a reimbursement for a business cost, not a taxable salary or a draw.
Where does this requirement come from?
You might be wondering, "Is this just a suggestion, or is it the law?" The requirement for an accountable plan actually comes directly from the IRS tax code (specifically Internal Revenue Code Section 62).
The IRS uses this code to distinguish between "accountable" and "non-accountable" plans. If you don't have a plan that meets their specific criteria, they view any money the business gives you as a "non-accountable" payment. In the eyes of the law, that means the money is treated as taxable wages → meaning you'd owe both income tax and payroll tax on your own reimbursements!
Why do you need one?
Without an accountable plan, the IRS could look at those reimbursements and say "that looks like extra income to us." An accountable plan protects you by making those reimbursements:
Tax-free for you: The money goes into your personal account without increasing your tax bill.
Fully deductible for the business: Your S Corp gets to lower its net profit by the amount of the reimbursement.
Three simple rules to stay compliant
To keep the IRS happy under Section 62, your plan needs to follow three basic principles:
Business connection: The expense must be for something necessary for your business (like that new ergonomic mouse or a client lunch).
Substantiation: You have to prove the expense happened. This means keeping receipts.
Return of excess: If the business accidentally pays you back more than you actually spent, you have to return the extra money to the business.
How to get started
Technically, the IRS does not require your accountable plan to be a formal, written document. As long as you follow the three rules mentioned above, you are meeting the legal requirement.
However, we strongly recommend having a written plan in your corporate records. Why? Because if you are ever audited, a written document proves that your intent was to follow the law from day one. It removes the guesswork and shows the IRS that your reimbursements aren't just an afterthought—they are a consistent business policy.
From there, the routine is simple:
Once a month: Total up your out-of-pocket costs — a spreadsheet is a great tool for this. Bonus points for snapping photos of the receipts.
Transfer the funds: Move that exact total from your business bank account to your personal account.
Record it in QBO: When the transfer shows up in your bank feed, code the transaction to the appropriate business expense accounts (like "Office Supplies," "Telephone," or "Travel"). If your reimbursement covers several different categories, use the "Split" feature to allocate the individual expenses to their correct categories. You can even attach your spreadsheet and/or receipt images to the transaction in QBO!
Want a second set of eyes?
We know that IRS compliance can sound complicated, but it’s really just about creating a simple habit. Having an accountable plan in place is one of the best ways to feel confident that you’re running your S Corp the right way.
If you need help setting up your workflow or getting your reimbursements categorized correctly in QBO, reach out!
