ACCOUNTABLEPLAN
Your corporation can pay you back for costs you already carry
If you own an S corporation and work in it, you are its employee. An accountable plan lets the corporation reimburse you for business costs you pay personally. The corporation deducts the reimbursement, and you pay no tax on it. With a 150 square foot home office, a $150 phone and internet bill, and 5,000 business miles, the reimbursements come to about $7k a year. That saves about $1,300 in tax in the 24 percent bracket.
In our opinion, this is worth doing for the same reason as the Augusta Rule. Most tax savings ask you to part with money. A 401(k) locks it away, and paying your children hands it to them. This one pays you back for money you were already going to spend on the home, the phone, and the miles. You are trading attention and paperwork for pure savings.
What would this save you?
Enter what you already pay. The calculator figures the business share of each cost and what the deduction is worth. Nothing you enter here is saved or sent anywhere. The result is an educational estimate. It is not tax advice for your situation.
Your situation
This year’s figures
The 2026 mileage rate is 72.5 cents through June and 76cents from July. Put in the rate for the miles you are counting.
What it saves
Where the saving comes from
| Cost | Net annual saving |
|---|
The rule underneath all of it
A reimbursement paid under an accountable plan is not wages. The plan has three rules. The expense has to be a business expense you paid while working for the corporation. You have to document it to the corporation within a reasonable time. And you have to return anything you were paid above what you documented.
When all three are met, the corporation deducts the payment and you leave it off your return. When they are not, the payment is wages, with income tax and payroll tax on it.
The plan matters because an employee cannot deduct job expenses on a personal return. An owner who works for their own corporation is an employee. Without a plan, the home office, the phone, and the miles produce no deduction.
S corporation or C corporation owner on payroll
WorksYou are an employee of your corporation, so the plan applies to you the way it would to any employee. This is where the plan does the most good.
Sole proprietorship or single-member LLC
Not neededYou are not an employee, so there is nothing to reimburse. You deduct the home office and the business miles directly on your own return.
Partnership or multi-member LLC
Works differentlyPartners are not employees either, so the plan does not apply the same way. You may instead be able to deduct these costs as unreimbursed partnership expenses (UPE). That works when your partnership agreement requires you to pay them. Talk to a professional before you rely on it.
The three costs most owners already pay
Each cost needs two things: a way to figure the business share, and a record that backs it up.
| Cost | How to figure it | What documents it |
|---|---|---|
| Home office | The office’s share of the home’s square footage, times what the home actually cost | 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 you set the percentage |
| Business miles | Miles driven for the business, times the IRS mileage rate | A mileage log with the date, destination, purpose, and miles |
Home office
The office has to be used regularly, and only for the business. It has to be your principal place of business. That includes the place where you do the administrative work, if you have no other fixed place for it. For an employee, the use also has to be for the convenience of the corporation.
Phone and internet
Reimburse the share you use for the business. Keep the bills, and write down how you arrived at the percentage.
Business miles
Driving from home to a regular office is commuting, and commuting does not count. If your home office is your principal place of business, the drive from home to a client or a jobsite is a business trip. The 2026 rate is 72.5 cents a mile through June and 76 cents from July.
Timing
The IRS treats two periods as reasonable. Turn in your expenses within 60 days of paying them, and return any excess within 120 days. In our opinion, a monthly or quarterly expense report is the easy way to stay inside both.
Setup, and what you keep
Once, to set it up
- Adopt the plan in writing. A short resolution and a one-page policy are enough.
- Measure the office and the home, and figure the percentage
- Set the business share of the phone and internet, and write down why
- Start a mileage log
- Pick a schedule for expense reports, monthly or quarterly
Every month or quarter
- Fill in the expense report from the bills and the mileage log
- Attach the bills and the log
- Have the corporation pay you by check or transfer
- Record the payment in the books as a reimbursed expense
- File the report and its support together
What goes wrong
You can do the version you see on social media and risk having it thrown out on audit. Or you can frame it up so it stays effective. Here is what the first version looks like.
| The mistake | The fix |
|---|---|
| Reimbursing a round number | Reimburse what the bills and the log show. A flat monthly 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. Expenses reported within 60 days fall inside the timing the IRS treats as reasonable. |
| 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 what the home actually cost. |
| 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 your 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. |
Working through this with an AI assistant?
Paste this into Claude, ChatGPT, or whichever assistant you use. It points your assistant at our full guide to this strategy. The guide covers the rules and their sources, this year’s figures, the setup steps, the paperwork, and the risks. It also tells the assistant when to send you to a professional. Nothing is held back.
Read https://www.reddoortaxes.com/guides/accountable-plan.md from Red Door Taxes. I own a corporation and work in it, and I want an accountable plan to reimburse my home office, phone, and business mileage. Using that guide, ask me its intake questions one at a time, tell me whether I qualify and what could go wrong, help me figure each reimbursement, then walk me through the setup and the expense reports. Tell me plainly when the guide says to stop and get a professional.
The guide is a plain page that anyone can read: open the guide. It states the same rules and the same figures as this page, with a source for each.
The expense report is what makes this hold up
A defensible version of this runs on paper. You need a written plan, a home office calculation, and a mileage log. You also need an expense report with its bills, turned in on a schedule. Everything you need to run it yourself is on this page, and nothing is held back. If you would rather hand it off, implementation is 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.
Book a consultationAbout Red Door
Red Door Taxes was founded after I was taken advantage of by a lazy and unscrupulous tax preparer when I was a new business owner. The preparer explained nothing about business ownership, write-offs, business structure, or how to avoid a big tax bill at the end of the year. I was so frustrated with the experience that I enrolled in accounting classes so that I could prepare my own taxes. I have been preparing taxes professionally since 2011 and have been an enrolled agent since 2017.
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Ryan of Red Door Taxes is the best tax preparer I have ever used. He provides professional, knowledgeable service that inspires confidence. I have relied on him for years and highly recommend him for both business and personal tax needs.
Ryan has been doing our taxes for a few years now. He takes the time to understand our family goals and uses his expertise to ensure our returns are tailored to our needs. You simply can't go wrong with Ryan; he has earned our highest recommendation!
As an Enrolled Agent, Ryan is extremely knowledgeable about the specific deductions our family was eligible for and helped us navigate tax implications from home sales and investments. He answered all our questions, referencing the applicable rules, and provided future planning advice.
For educational purposes only. This page and its calculator are general education for business owners. They are not tax, legal, or accounting advice for your specific situation, and reading them does not create a client relationship with Red Door Taxes. The calculator estimates federal income tax only. It ignores state income tax. It assumes the home office, the phone use, and the miles all qualify. Your entity, your home, your records, and the current year’s mileage rate all change the result. Nothing you enter in the calculator is saved or transmitted. Bring us your facts before you act on any of it.