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Are you missing out on key tax deductions by mixing personal and business expenses?
In this episode, Mike Jesowshek discusses the importance of setting up an accountable plan for businesses, especially S and C corporations. He breaks down how accountable plans allow business owners to reimburse themselves for personal expenses with a business use, ensuring that the reimbursements are not taxable. Mike emphasizes key requirements for an accountable plan, such as having a business connection, proper substantiation, and timely payments, while also highlighting common deductible expenses like home office, automobile use, and travel.
Find out how an accountable plan can help you save on taxes while staying compliant with the IRS!
[00:00 - 05:21] Introduction to Accountable Plans
- Mike introduces the concept of an accountable plan and its importance for business owners.
- He explains how separating business and personal expenses is crucial to avoid IRS scrutiny.
- He also mentions that even if personal payments are made for business items, they can be reimbursed with a plan.
[05:22 - 10:37] Key Requirements of an Accountable Plan
- Mike outlines the four main requirements: business connection, substantiation, avoiding excess payments, and timely payments.
- He discusses examples of business-related expenses that can be reimbursed, such as home office use and automobile expenses.
- Turning reimbursements into taxable income can cause risks if not handled properly.
[10:38 - 13:49] Setting Up an Accountable Plan
- Mike walks through the process of setting up a written reimbursement policy (accountable plan).
- Businesses need to create a reimbursement tracker to document expenses.
- Taxelm’s templates and tools can help businesses implement these plans correctly.
[13:50 - 17:43] Common Expenses for Reimbursement
- Mike highlights the most common reimbursable expenses: home office, automobile, cell phone, internet, and travel.
- Business owners should take advantage of available deductions to reduce taxable income.
Direct Quotes:
"The IRS looks at that as being sloppy. So the first key to understand is to always have a separate business bank account and credit card that you run all of your business activity through." - Mike Jesowshek, CPA
- "If you don't have an accountable plan put in place, it will be taxable to us, and that's why it's so important." - Mike Jesowshek, CPA
"The IRS gives us incentives as business owners—home office deductions, automobile deductions—but it's your responsibility to understand and implement them correctly." - Mike Jesowshek, CPA
Check out this episode’s blog post: How Do I Reimburse Myself From the Business? When Does An Accountable Plan Come Into Play?
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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
Join TaxElm: https://taxelm.com/
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Small Business Tax Savings Podcast