Non-Accountable Plan
Definition of 'Non-Accountable Plan'A system under which a business provides payments to its employees to cover business expenses incurred for meals, travel, transportation, or entertainment, but under which the employee does not have to substantiate the expenses or return advance payments in excess of the amount actually used. By contrast, under an accountable plan, the employee must substantiate what the expense was, how much it was, and that it was incurred while doing business for the company. Any advances not used must be returned to the company. |
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Investopedia explains 'Non-Accountable Plan'If a business gives an employee $100 to cover the cost of meals while away on a business trip, under a non-accountable plan, the employee could eat inexpensive fast food for every meal and pocket the savings. For this reason, the IRS treats payments made under non-accountable plans as taxable income. Accountable plan expenses are not considered taxable income. |
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