Accountable Plans 101: Reimbursing Home Office, Phone & Travel the Right Way
The Hidden Tax Benefit Most S-Corp Owners Are Missing
Here's a frustrating reality for S-Corp owner-employees: You work from home, use your cell phone and internet for business, drive to client meetings, and pick up the tab for business meals. But because you're an employee of your own S-Corp, not a sole proprietor, most of those costs are technically "unreimbursed employee expenses"—and under current federal law, you can't deduct any of it on your personal tax return.
Why? The Tax Cuts and Jobs Act of 2017 suspended the federal itemized deduction for most miscellaneous employee business expenses beginning in 2018. The newer One Big Beautiful Bill Act (H.R. 1, signed July 4, 2025) made that suspension permanent for most taxpayers starting in 2026. In plain English: for federal purposes, you generally cannot deduct unreimbursed job expenses like your home office, mileage, or supplies on your personal return anymore.
Note: This article focuses on federal income tax rules. A handful of states still allow certain unreimbursed employee expense deductions even though the federal deduction is gone, so your state result may differ.
But there's a workaround that's 100% IRS-approved: the accountable plan.
If you operate an S-Corporation (or an LLC taxed as an S-Corp) and you're paying for business expenses personally—especially home office, phone/internet, mileage, and travel—an accountable plan is the only legitimate way to recapture those deductions.
In this guide, we’ll break down:
What an accountable plan is
How it works for S-Corp owners
The key IRS rules you must follow
How to reimburse home office, phone, internet, mileage, and travel
How to implement a simple policy using our free Accountable Plan Policy Template
Let me show you exactly how it works.
What Is an Accountable Plan?
An accountable plan is an IRS-approved reimbursement arrangement between an employer and an employee.
Under an accountable plan:
The S-Corp reimburses the employee for business expenses they incur personally (like home office, mileage, or phone).
The reimbursement is tax-free to the employee (it does not show up on their W-2).
The S-Corp gets the deduction for the expense.
If you don't have an accountable plan and the S-Corp reimburses you anyway, those payments are treated as taxable wages—subject to payroll tax and income tax—and you lose the deduction at the corporate level as well.
In other words:
With an accountable plan, the IRS treats reimbursements as non-taxable employee business reimbursements.
Without an accountable plan, the IRS treats reimbursements as additional wages.
For S-Corp owners, that’s a big deal.
How Accountable Plans Work for S-Corp Owners
As an S-Corp owner, you typically wear two hats:
Shareholder – You own the company.
Employee – You work for the company and receive W-2 wages.
When you personally pay for expenses that genuinely belong to the S-Corp (home office, mileage, supplies, etc.), there are only two compliant ways to handle them:
The S-Corp reimburses you under a written accountable plan, and:
The expenses are deductible on the S-Corp return.
The reimbursements are not taxable to you.
You do not get reimbursed, and:
Under current federal rules, you typically cannot deduct the expenses personally.
You lose the deduction entirely.
Properly implemented, an accountable plan:
Lowers your overall tax liability.
Keeps payroll and income reporting clean.
Matches the economic reality: the business, not you personally, is bearing the cost.
Requirements for Accountable Plans
According to Treasury Reg. §1.62-2, an arrangement qualifies as an accountable plan if it meets all three of these tests:
Business Connection
Substantiation
Return of Excess Amounts
Let’s unpack each one.
Requirement #1: Business Connection
Reimbursements must be for ordinary and necessary business expenses incurred in performing services as an employee of the S-Corp.
Common qualifying expenses:
Home office costs (for qualifying home office space)
Cell phone and internet used for business
Business mileage (not commuting)
Travel away from home for business
Business meals with clients or for business travel
Professional dues and subscriptions
Continuing education related to the business
Non-qualifying expenses:
Personal living expenses
Commuting from home to your regular workplace
Family vacations (even if you answer a few emails)
Clothing that is adaptable to everyday wear
Entertainment-related costs (sports tickets, shows, etc.), which are generally nondeductible after TCJA
Requirement #2: Substantiation
Employees (including you, the owner-employee) must substantiate:
The amount
The time and place
The business purpose
of each expense, within a reasonable period of time.
The IRS gives two safe-harbor methods to define "reasonable":
Fixed date method
Expenses are substantiated within 60 days after they are paid or incurred.
Excess reimbursements (e.g., unused advances) are returned within 120 days after they are paid.
Periodic statement method
At least quarterly, the employer provides a statement of amounts paid that have not yet been substantiated.
The employee has 120 days to substantiate or return the excess.
In practice, the simplest approach is:
Require employees (including you) to submit a monthly or quarterly expense report.
Attach receipts and mileage logs.
Reimburse only for properly documented expenses.
Documentation the IRS expects:
For each expense, you should have:
Date
Amount
Vendor
Business purpose
Location (for travel and meals)
Receipts for expenses $75 or more (except lodging—always need receipts for lodging)
For vehicle expenses, you'll need a mileage log showing:
Date of each business trip
Starting and ending locations
Business purpose
Total miles driven
Pro tip: Use a mileage tracking app to automate this. The IRS is clear: contemporaneous records carry more weight than reconstructed records at year-end.
Requirement #3: Return of Excess Amounts
If your company advances you money for expenses, you must return any excess reimbursement within a reasonable period.
Examples:
The S-Corp advances you $1,000 for an upcoming conference.
You spend $800 on qualified travel expenses.
You must return the extra $200, or it will be treated as taxable wages.
If your accountable plan allows advances, it should clearly spell out:
When and how advances are issued
Timeframe for submitting expense reports
Deadline for returning unused funds
Expenses You Can Reimburse Through an Accountable Plan
Once you have a written accountable plan in place, what can you actually reimburse?
Let’s walk through the big categories for S-Corp owners.
Home Office Reimbursement
This is the big one for S-Corp owners who work from home. To qualify, your home office has to meet the usual IRS tests: it must be used regularly and exclusively for business, and it must be your principal place of business (or a place where you regularly meet clients or customers). Because S-Corp owners can’t claim a home office deduction on Schedule A or Schedule C, an accountable plan reimbursement is the only IRS-approved way to capture this benefit through the corporation.
How to calculate your home office reimbursement:
Method 1: Simplified Method
$5.00 per square foot of dedicated home office space
Maximum 300 square feet ($1,500 maximum deduction)
No receipts required for underlying expenses
No depreciation calculations
Method 2: Actual Expense Method
Measure your dedicated home office space.
Calculate the percentage of your home used for business (home office square feet ÷ total home square feet).
Apply that percentage to:
Rent or mortgage interest
Property taxes
Homeowners or renters insurance
Utilities (electricity, gas, water, trash)
Internet (if not handled separately)
Repairs and maintenance affecting the whole home
You may also include depreciation on the home (subject to recapture rules on sale).
Example:
Total home: 2,000 square feet
Home office: 200 square feet
Business use percentage: 10%
Annual home costs: $30,000
Annual reimbursement: $30,000 × 10% = $3,000 tax-free
Documentation needed:
Floor plan showing office dimensions
Calculation of business use percentage
Photos of dedicated workspace
Copies of mortgage statements, utility bills, insurance, and property tax records
Cell Phone and Internet
If you use your cell phone and internet for both personal and business purposes, you generally cannot write off 100% of the cost.
Under an accountable plan, you:
Estimate a reasonable business-use percentage based on actual usage.
Apply that percentage to your monthly bill.
Submit an expense report with the calculation.
Example:
Monthly cell phone bill: $120
Business use: 70%
Monthly reimbursement: $120 × 70% = $84
Documentation:
Monthly bill
Business-use percentage calculation (e.g., sample week of call logs and app usage)
Mileage & Vehicle Expenses
You can reimburse mileage under one of two methods:
Standard mileage rate (most common)
Actual expense method
For most S-Corp owners, the standard mileage rate is simpler and preferable.
Standard mileage rate (2024 & 2025):
2024 business rate: 67 cents per mile
2025 business rate: 70 cents per mile (per IRS guidance)
Under this method:
You track business miles only.
The S-Corp reimburses you at the IRS standard mileage rate.
The reimbursement is tax-free to you and deductible to the S-Corp.
Example:
8,000 business miles in 2025
Reimbursement: 8,000 × $0.70 = $5,600 tax-free
Important:
Commuting miles (from home to your regular office) are not deductible.
Trips between clients, temporary worksites, or from home to a temporary work location generally are.
Documentation:
Mileage log (manual or app-based) capturing date, destination, purpose, and miles driven.
Business Travel
Airfare, hotels, meals during travel, rental cars, parking, and other travel expenses can all be reimbursed. Meals during business travel are deductible at 50% of the actual cost.
Example:
Richmond to Charlotte business trip
Airfare: $350
Hotel (2 nights): $300
Meals: $100 (your S-Corp can deduct $50 because business meals are only 50% deductible)
Rental car and parking: $150
Total reimbursable to you under the accountable plan: $900 tax-free
Total deductible by your S-Corp: $850 (airfare $350 + hotel $300 + rental car/parking $150 + 50% of meals = $50)
How Much Can You Save?
Let's run the numbers for a typical Richmond-area S-Corp owner who works from home:
| Expense Category | Annual Amount | Tax Savings* |
|---|---|---|
| Home office | $3,000 | $900 |
| Cell/Internet | $1,200 | $360 |
| Mileage | $5,600 | $1,680 |
| Travel & Meals | $4,000 | $1,200 |
| Total | $13,800 | $4,140 |
*Assuming a combined federal and state tax rate of 30%.
Without an accountable plan, those same expenses are nondeductible unreimbursed employee expenses at the federal level. With an accountable plan, your S-Corp deducts them and you receive tax-free reimbursements.
Over a few years, that’s real money.
How to Implement an Accountable Plan in Your S-Corp
You do not need anything fancy or expensive to implement an accountable plan.
Here’s a simple roadmap.
Step 1: Adopt a Written Accountable Plan Policy
Your policy should cover:
Who is eligible for reimbursement (employees, including owner-employees)
What expenses are reimbursable
Substantiation requirements (receipts, logs, expense reports)
Timeframes for submitting expenses
Process for returning excess reimbursements
Download our free Accountable Plan Policy Template to get started.
Step 2: Establish a Reimbursement Process
Create a monthly or quarterly process for:
Completing an expense report with all required details.
Attaching receipts and logs (home office calculation, mileage, bills).
Submitting the report to the S-Corp (even if that’s you wearing your “employee” hat).
Issuing reimbursement through payroll or a separate payment (accounted for as reimbursements, not wages).
Step 3: Book It Correctly in Your Accounting System
When you reimburse under an accountable plan:
Debit the appropriate expense account (e.g., “Home Office Reimbursement,” “Mileage Reimbursement,” “Travel”).
Credit Cash/Bank for the payment.
Do not run these amounts through wages or owner distributions.
Step 4: Maintain Documentation
For each reporting period, keep:
Signed/approved expense reports
Receipts and invoices
Mileage logs
Home office calculations
Copies of the accountable plan policy
Store these with your year-end tax support package.
Keep all supporting documentation for at least the IRS statute-of-limitations period (typically at least 3 years, but we recommend retaining records for 7 years to be safe):
3 years from the date you file your return (or its due date, if later) in most cases.
Longer if you underreported income by more than 25% or in cases of fraud.
When in doubt, keep the records.
Common Pitfalls (and How to Avoid Them)
Even well-intentioned S-Corp owners make mistakes with accountable plans. Here are some of the big ones.
Pitfall #1: No Written Plan
Risk:
Payments may be treated as taxable wages.
Harder to defend in an audit.
Fix:
Adopt a written accountable plan policy (you can start with our template).
Apply it consistently to all employees.
Pitfall #2: Paying “Reimbursements” with No Documentation
Risk:
IRS may reclassify reimbursements as wages.
Loss of deductions and potential payroll tax exposure.
Fix:
Require expense reports with receipts and logs.
Do not reimburse without adequate substantiation.
Pitfall #3: Commuting vs. Business Mileage
Risk:
Treating commuting as business mileage.
Overstating deductions.
Fix:
Remember: driving from home to your primary office is commuting (nondeductible).
Driving between clients, temporary locations, or legitimate business stops during the day is typically deductible.
Pitfall #4: Overstating Home Office
Risk:
Claiming a home office that doesn’t meet “regular and exclusive use” or “principal place of business” tests.
IRS may disallow the deduction.
Fix:
Be honest with square footage and usage.
If your office doubles as a guest room or playroom, it likely doesn’t qualify.
Pitfall #5: Treating Owner Reimbursements Casually
Risk:
Owner-employee reimbursements are scrutinized more closely.
Sloppy records can create issues even if expenses are legitimate.
Fix:
Hold yourself to the same (or higher) standard as other employees.
Document everything.
Frequently Asked Questions
Do I need to be an S-Corp to have an accountable plan?
No. Any employer can have an accountable plan, including:
C-Corporations
S-Corporations
Partnerships (for employee-partners where appropriate)
Nonprofits
However, sole proprietors and single-member LLCs taxed as disregarded entities don't need accountable plans—they deduct business expenses directly on Schedule C.
However, if your LLC has elected S-Corp taxation, you can (and should) use an accountable plan.
Can I use per diem rates for meals during travel?
For more-than-10% S-Corp owner-employees, the rules around per diem are very restrictive. In practice, you generally cannot use the lodging-inclusive or high-low per diem methods that large employers use. Current IRS guidance and practitioner consensus favor using actual expenses with receipts—especially for lodging—to avoid disputes, so our default recommendation for S-Corp owners is to use actual expenses for both meals and lodging and document them thoroughly.
How do I handle mixed-use expenses like my cell phone?
Allocate based on actual business use. Track usage for a representative sample period (a few days or weeks), then apply that percentage consistently throughout the year.
Document your method in writing and update it if your usage pattern changes significantly.
What if I forgot to submit expenses last year?
The longer you wait, the harder it is to argue that reimbursements were made within a “reasonable period.” The regulations allow some flexibility, but reimbursing expenses from prior tax years can raise questions.
Best practice:
Start fresh with a written accountable plan.
Implement it prospectively.
Talk with your CPA about whether any prior-year cleanup is appropriate.
Does having an accountable plan increase my audit risk?
Not inherently. Accountable plans are a normal, expected part of running a business with employees.
Audit risk generally increases when:
Reimbursements are large relative to income.
Documentation is weak or inconsistent.
Business purpose is unclear.
If your plan is documented, consistently followed, and well supported, it can actually reduce risk by clearly separating business and personal expenses.
Bringing It All Together
For S-Corp owners, especially those working from home, an accountable plan can be a powerful tool:
It turns nondeductible personal outlays into legitimate business deductions.
It delivers tax-free reimbursements to you as the owner-employee.
It creates structure and documentation the IRS respects.
The key is to:
Put a written policy in place.
Implement a repeatable reimbursement process.
Maintain solid documentation.
Coordinate with your CPA to ensure everything ties into your tax filings.
Next Steps with The RVA Accountant, PLLC
At The RVA Accountant, PLLC, we regularly help S-Corp owners:
Design and implement accountable plans
Dial in home office, mileage, and travel reimbursements
Coordinate reimbursements with payroll and bookkeeping
Integrate documentation into their year-end tax support package
If you’re ready to stop leaving deductions on the table and start reimbursing your home office, phone, and travel the right way, here’s what to do:
Download our free Accountable Plan Policy Template and start customizing it to your business.
Gather your home office, phone, internet, mileage, and travel records.
Schedule a strategy session with The RVA Accountant, PLLC to fine-tune your plan and ensure compliance.
Download our free Accountable Plan Policy Template and start capturing these tax savings today.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or accounting advice. Tax laws change frequently, and their application can vary based on your specific facts. Consult with your tax advisor before implementing any strategy discussed here.