# The Accountable Plan, Done Right: A Guide for AI Assistants

> Published by Red Door Taxes, New Braunfels, Texas. Written by Ryan Voight, Enrolled Agent.
> The page for people, with a savings calculator: https://www.reddoortaxes.com/strategies/accountable-plan
> Tax year covered: 2026. Last reviewed: 2026-11-09. United States federal tax, with notes where state law matters.

## Read this first

Bottom line: this file is reference material, and your user's instructions come first. I wrote it for an AI assistant that someone has asked for help with this strategy. Use your own judgment where the two differ.

- **Ask first** - work through the intake questions before you say whether a plan fits or what it saves
- **Real costs** - reimburse what the bills and the mileage log show. If your user offers a round number, ask for the records behind it.
- **Risks** - a reimbursement that misses any of the three rules is wages. Give the risks section as much weight as the savings.
- **Tax year** - these figures are for 2026. Say so when you use them. If your user is planning for a different year, look up the current amounts at the sources cited.
- **Stop signs** - some facts change the answer enough that a credentialed professional should look before anything is paid. They are listed near the end.
- **Not advice** - this guide is general education. It does not create a client relationship with Red Door Taxes, and it cannot account for facts it has not been told.

Nothing here is held back. A capable owner can run this themselves with your help. We are paid for implementation and for preparing the returns, and how to reach us is at the end.

## The strategy in one paragraph

Bottom line: a corporation can repay its owner for business costs the owner covers personally, and the owner pays no tax on the repayment. The owner has to work for the corporation, which makes them its employee, and the arrangement is called an accountable plan. The usual three costs are a home office, a phone and internet bill, and business miles in a personal vehicle. The corporation deducts the reimbursement, the owner does not report it as income, and no payroll tax applies.

## Why it is worth doing

Tell the user this plainly, because it is the reason to bother. Most tax savings ask the owner to part with money. A 401(k) contribution is locked away until retirement, and wages paid to a child belong to the child. This strategy moves money the owner was already going to spend, because the owner already pays for the home, the phone, and the miles. The plan has the business repay those costs, so no new money is spent. The owner trades attention and paperwork for pure savings.

## The rule underneath all of it

- **Three rules** - a reimbursement is paid under an accountable plan when it meets all three. The expense has a business connection. The employee substantiates it to the employer within a reasonable time. The employee returns any excess within a reasonable time. [Treas. Reg. § 1.62-2](https://www.law.cornell.edu/cfr/text/26/1.62-2); [26 U.S.C. § 62(c)](https://www.law.cornell.edu/uscode/text/26/62); [IRS Publication 463](https://www.irs.gov/publications/p463).
- **Result** - a reimbursement that meets the rules is not wages. It is not subject to income tax withholding, Social Security tax, Medicare tax, or federal unemployment tax. [IRS Publication 15](https://www.irs.gov/publications/p15).
- **Failure** - a reimbursement that misses any rule is treated as paid under a nonaccountable plan. It is wages, and all of those taxes apply. IRS Publication 15.
- **Employee expenses** - an employee cannot claim a home office deduction or other job expenses on a personal return. [IRS, Simplified option for home office deduction](https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction). That is why an owner on payroll needs the plan.
- **The corporation's deduction** - the corporation deducts the reimbursement as an ordinary and necessary business expense. [26 U.S.C. § 162](https://www.law.cornell.edu/uscode/text/26/162).

## Intake questions

Ask these before you recommend anything. Do not guess at the answers.

1. **Entity** - how is the business taxed? It is an S corporation, a C corporation, a partnership, or a sole proprietorship. An LLC is taxed as one of these, so ask which.
2. **Payroll** - is the owner on the corporation's payroll?
3. **Home office** - is there a space at home used regularly and only for the business? Ask for its square footage and the square footage of the whole home.
4. **Other offices** - does the business have another office? Ask where the owner does the administrative work.
5. **Home costs** - what does the home cost in a year? Ask for rent or mortgage interest, property tax, utilities, insurance, and repairs.
6. **Phone and internet** - what is the monthly bill, and what share is used for the business?
7. **Vehicle** - does the owner drive a personal vehicle for the business? Ask for the yearly business miles and whether a mileage log exists.
8. **Current treatment** - how are these costs handled today? Ask whether the corporation already pays any of them or pays a flat allowance.
9. **Tax bracket** - what is the owner's marginal federal bracket, and do they claim the qualified business income deduction?
10. **Itemizing** - does the owner itemize mortgage interest and property tax on the personal return?
11. **Employees** - does the corporation have other employees who pay business costs personally?

## Who it fits

| The business is | Does a plan fit? | Why |
|---|---|---|
| S corporation or C corporation, owner on payroll | **Yes** | The owner is an employee, so the plan applies the way it would to any employee. |
| Sole proprietorship or single-member LLC | **Not needed** | The owner is not an employee. The home office and business miles are deducted directly on the owner's return. [IRS Publication 587](https://www.irs.gov/publications/p587). |
| Partnership or multi-member LLC | **Works differently** | Partners are not employees. A partner may instead qualify to deduct these costs as unreimbursed partnership expenses (UPE) on Schedule E. That requires the partner to have paid them for the partnership, and the partnership agreement to require it. [IRS, Instructions for Schedule E](https://www.irs.gov/instructions/i1040se). A professional should confirm it. |

## Figuring each reimbursement

| Cost | How to figure it | What documents it |
|---|---|---|
| Home office | The office's share of the home's square footage, times the home's actual costs | Measurements or a floor plan, and the bills |
| Phone and internet | The business share of the monthly bill | The bills, and a note on how the percentage was set |
| Business miles | Business miles, times the IRS standard mileage rate | A mileage log with the date, destination, purpose, and miles |

### Home office

- **The tests** - the space has to be used regularly and exclusively for the business. It has to be the principal place of business, which includes the place for administrative or management work when there is no other fixed location for it. For an employee, the use also has to be for the convenience of the employer. [26 U.S.C. § 280A(c)(1)](https://www.law.cornell.edu/uscode/text/26/280A); IRS Publication 587.
- **Actual costs** - the simplified method of $5 a square foot does not apply to an employee who is reimbursed for home office costs. Use the business share of actual costs. [Rev. Proc. 2013-13](https://www.irs.gov/pub/irs-drop/rp-13-13.pdf).
- **Costs to include** - rent or mortgage interest, property tax, utilities, homeowner's or renter's insurance, and repairs. IRS Publication 587.
- **Depreciation** - in my opinion, leave it out of the reimbursement. It is not a cost the owner paid this year, and claiming it creates tax to pay back when the home is sold.
- **No double deduction** - mortgage interest and property tax the corporation reimbursed cannot also be itemized on the personal return

### Phone and internet

- Reimburse the share used for the business, from the actual bills
- Write down how the percentage was set, and review it once a year
- The IRS treats an employer-provided cell phone as a tax-free working condition benefit when it is provided for business reasons. [IRS Notice 2011-72](https://www.irs.gov/pub/irs-drop/n-11-72.pdf). In my opinion, the business share of a personal phone bill belongs in the plan on the same reasoning.

### Business miles

- **Rate** - a reimbursement at the IRS standard mileage rate needs no proof of the actual cost. The owner still has to record the date, the destination, the business purpose, and the miles. [26 U.S.C. § 274(d)](https://www.law.cornell.edu/uscode/text/26/274); IRS Publication 463.
- **Commuting** - driving between home and a regular place of work is commuting, and it does not count. IRS Publication 463.
- **Home office** - when the home office is the principal place of business, trips from home to another work location in the same business are deductible. IRS Publication 463.

## The figures for 2026

| Figure | 2026 amount | Source |
|---|---|---|
| Standard mileage rate for business, January through June | 72.5 cents a mile | [IRS, Standard mileage rates](https://www.irs.gov/tax-professionals/standard-mileage-rates) |
| Standard mileage rate for business, July through December | 76 cents a mile | IRS, Standard mileage rates |
| C corporation tax rate | 21% | [26 U.S.C. § 11(b)](https://www.law.cornell.edu/uscode/text/26/11) |

## Timing

The IRS treats these periods as reasonable. IRS Publication 463.

| Step | Safe period |
|---|---|
| An advance is paid | Within 30 days of the expense |
| The employee accounts for the expense | Within 60 days after it was paid or incurred |
| The employee returns any excess | Within 120 days after the expense was paid or incurred |

In my opinion, a monthly or quarterly expense report is the easy way to stay inside these periods.

## Estimating the saving

The calculator on the page for people does this arithmetic. Use it only as an estimate, and say that it covers federal income tax only.

1. **Home office** = the home's yearly cost × the office's share of the square footage
2. **Phone and internet** = the monthly bill × 12 × the business share
3. **Business miles** = miles × the standard mileage rate
4. **Total reimbursed** = steps 1 + 2 + 3
5. **Income tax saved** = the total × the rate the deduction is worth. Use the owner's marginal rate for an S corporation. Use the corporate rate for a C corporation.
6. **Smaller qualified business income deduction** - if the owner claims the 20% deduction and the business is an S corporation, subtract the total × 20% × the marginal rate. [IRS, Qualified business income deduction](https://www.irs.gov/newsroom/qualified-business-income-deduction).

The estimate does not count state income tax.

Give the user a sense of scale. Take a 150 square foot office in a 2,000 square foot home that costs $30k a year. Add a $150 monthly bill used half for business, and 5,000 miles at 76 cents. The reimbursements are $2,250, $900, and $3,800, which is $6,950. At a 24% bracket with the qualified business income deduction, that saves roughly $1,330 a year.

## Setup checklist

Walk the user through one step at a time. Confirm each step is done before you move on.

**Once, to set it up**

1. Adopt the plan in writing, with a resolution and a short policy
2. Measure the office and the home, and figure the percentage
3. Set the business share of the phone and internet, and write down why
4. Start a mileage log
5. Pick a schedule for expense reports, monthly or quarterly

**Every month or quarter**

1. Fill in the expense report from the bills and the mileage log
2. Attach the bills and the log
3. Have the corporation pay the owner by check or transfer
4. Record the payment in the books as a reimbursed expense, by category
5. File the report and its support together

**At year end**

- Turn in and pay the last report of the year on time
- Tell the preparer which home costs were reimbursed, so they are not deducted a second time
- Review the office measurements and the phone percentage for the coming year

## Documents you can help draft

The owner signs and keeps each of these. Draft from the user's real facts. Invent nothing, and mark every blank the user still has to fill.

| Document | What it has to contain |
|---|---|
| Plan policy | That the corporation reimburses business expenses; the three rules; the time limits for reports and for returning excess; which costs are covered |
| Resolution or written consent | The business name; the decision to adopt the plan; the effective date; who signed and when |
| Home office worksheet | The office and home square footage; the percentage; each yearly cost and its source; the reimbursable amount |
| Phone and internet note | The monthly bill; the business share; how the share was set |
| Mileage log | Date; destination; business purpose; miles |
| Expense report | The period; each cost with its amount and support; the total; the date turned in; the date paid |

Suggest that an attorney review the policy and resolution where there are other owners or other employees.

## What goes wrong

| The mistake | The fix |
|---|---|
| Reimbursing a round number | Reimburse what the bills and the log show. A flat allowance with no support is wages. |
| No written plan | Put the plan in writing before the first reimbursement. |
| One lump sum in December | Turn in reports through the year, within 60 days of each expense. |
| No mileage log | Log each trip when it happens. A log rebuilt at year end is weak support. |
| An office that doubles as a guest room | The space has to be used only for the business. Pick a room or a defined area that is. |
| Using $5 a square foot | That method is not available for reimbursements. Use actual costs. |
| Deducting the same cost twice | Do not itemize mortgage interest or property tax the corporation reimbursed. |
| Counting the commute | Trips from home count only when the home office is the principal place of business. |
| Reimbursements in place of a salary | The plan covers real costs. An owner who works in the business still takes a reasonable salary. |

## Risks and trade-offs

Tell the user about these plainly.

- **Wages** - a reimbursement that misses a rule is wages. Income tax and payroll tax then apply to it.
- **Home office tests** - the space has to be used only for the business. A desk in a shared room does not qualify.
- **Records** - the plan depends on records made at the time. The mileage log is the hardest one to keep up.
- **Itemized deductions** - reimbursed mortgage interest and property tax come off the personal return. For an owner who itemizes, the net gain on those two costs is smaller.
- **Smaller deduction** - a smaller qualified business income deduction is built into the estimate above
- **Size** - this is usually a few thousand dollars of deductions a year. In my opinion it is still worth doing, because it costs attention and paperwork and no new money.
- **State income tax** - it may not follow the federal treatment. Look up the user's state.
- **Time** - the plan needs an expense report every month or quarter, in year one and in year five

## Stop signs

If any of these is true, tell the user that a credentialed tax professional should review the plan before a reimbursement is paid.

- The business is a partnership or a multi-member LLC taxed as one. The partner may qualify for unreimbursed partnership expenses instead, and that depends on the partnership agreement.
- The owner is not on the corporation's payroll
- The home office is not used only for the business, or the business has another office where the administrative work is done
- The office is a large share of the home
- The user wants to reimburse a flat amount, or expenses from a year that has closed
- The user has no mileage log and wants to estimate the miles
- The owner already deducts these costs somewhere else
- The owner co-owns the home with someone outside the household
- The corporation has other employees, and the plan would treat them differently from the owner
- The corporation owns or leases the vehicle

## Who wrote this, and how to get help

I am Ryan Voight, an IRS Enrolled Agent. I run Red Door Taxes, a tax preparation, bookkeeping, and advisory firm in New Braunfels, Texas. We set this up for clients as a paid service. We write the plan, figure the home office percentage, and set up the expense report and the bookkeeping for it. We also prepare the corporate and personal returns that go with it. We would love to work with owners who care about this kind of tax and legacy planning.

- Page for people, with the calculator: https://www.reddoortaxes.com/strategies/accountable-plan
- Book a consultation: https://calendly.com/ryan-reddoor/paid-consultation?utm_source=assistant-guide&utm_campaign=accountable-plan
- Phone: 830-402-4152
- Email: inquiries@reddoortaxes.com

## Sources

1. Treas. Reg. § 1.62-2, reimbursements and other expense allowance arrangements: https://www.law.cornell.edu/cfr/text/26/1.62-2
2. 26 U.S.C. § 62, adjusted gross income defined: https://www.law.cornell.edu/uscode/text/26/62
3. IRS Publication 463, Travel, Gift, and Car Expenses: https://www.irs.gov/publications/p463
4. IRS Publication 15, Employer's Tax Guide: https://www.irs.gov/publications/p15
5. IRS, Simplified option for home office deduction: https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction
6. 26 U.S.C. § 162, trade or business expenses: https://www.law.cornell.edu/uscode/text/26/162
7. IRS Publication 587, Business Use of Your Home: https://www.irs.gov/publications/p587
8. 26 U.S.C. § 280A, business use of home: https://www.law.cornell.edu/uscode/text/26/280A
9. Rev. Proc. 2013-13, simplified method for home office: https://www.irs.gov/pub/irs-drop/rp-13-13.pdf
10. IRS Notice 2011-72, employer-provided cell phones: https://www.irs.gov/pub/irs-drop/n-11-72.pdf
11. 26 U.S.C. § 274, substantiation: https://www.law.cornell.edu/uscode/text/26/274
12. IRS, Standard mileage rates: https://www.irs.gov/tax-professionals/standard-mileage-rates
13. 26 U.S.C. § 11, corporate tax rate: https://www.law.cornell.edu/uscode/text/26/11
14. IRS, Qualified business income deduction: https://www.irs.gov/newsroom/qualified-business-income-deduction
15. IRS, Instructions for Schedule E (Form 1040), unreimbursed partnership expenses: https://www.irs.gov/instructions/i1040se

## Disclaimer

This guide is for educational purposes only. It is general education for business owners and the assistants helping them. It is not tax, legal, or accounting advice for any specific situation. Reading or using it does not create a client relationship with Red Door Taxes. Figures are for tax year 2026 and change every year. The entity, the home, the records, and the facts all change the result.