Danielle Hayden continues our series on tax deductions by diving deeper into accountable plans: a tax strategy that enables business owners to efficiently manage reimbursements of personal expenses with a business purpose. She addresses the importance of separating personal expenses from business expenses before going over the guidelines and limitations of accountable plans. This episode is a step-by-step guide on creating an accountable plan and implementing this strategy within your business framework. Tune in now to learn how to leverage the accountable plan tax strategy and increase profitability in your business!

Key Takeaways:

  • An accountable plan is a tax strategy that outlines a reimbursement process for personal expenses with a business purpose, while also decreasing net income and results in a lower tax liability.
  • Only S Corps qualify for reimbursements through an accountable plan, while LLCs and sole-proprietors must take tax deductions.
  • Business owners should pay themselves a reasonable salary through payroll and avoid taking draws from the business, only reimbursing themselves with the accountable plan.
  • Qualifying business expenses include vehicle, home office, cell phone and more.
  • Accurate tracking and proper documentation is essential for adherence to IRS guidelines.

 

Topics Discussed: 

Accountable plans: A tax strategy (0:40)

The importance of separating business and personal expenses (1:06)

Determining eligibility for the accountable plan strategy (1:45)

Steps to implement the accountable plan strategy (3:43)

The benefits of the accountable plan for businesses (4:10)

Requirements of an accountable plan (5:00)

The reimbursement process in the accountable plan (5:26)

Qualifying expenses in an accountable plan (7:13)

 

Resources

Listen to Don’t Jeopardize Your Business! Why Not Co-Mingle Business & Personal Finances – Ep 143: https://kickstartaccountinginc.com/dont-jeopardize-your-business-why-not-co-mingle-business-personal-finances/

Listen to Leveraging Home Office Tax Deductions for Entrepreneurs – Ep 155: https://kickstartaccountinginc.com/entrepreneur-money-stories-ep-155/

Listen to Tax Deductions: How to Maximize Vehicle Deductions in Your Business – Ep 159: https://kickstartaccountinginc.com/tax-deductions-how-to-maximize-vehicle-deductions-in-your-business-ep-159/

 

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