Finance & Accounting
BPM-218 Accountable Plan Business Expense Reimbursements
Revised February 18, 2005
Accountable Plan Rules
In accordance with IRS regulations, the University has an accountable plan that allows it to reimburse employees for authorized business expenses with no effect on taxable compensation. The accountable plan rules apply to all reimbursements or advances to employees for authorized business expenses, both travel and non-travel related.
The requirements for an accountable plan are that an employee must:
- Have paid or incurred business-related expenses while performing services for the University,
- Properly account for or substantiate the expenses within 60 days after the expenses are paid or incurred,
- Return any reimbursement or advance in excess of amounts substantiated within 120 days after the expense is paid or incurred.
To satisfy the first requirement, there must be a business connection or purpose for the expense and the expense must qualify as a deductible expense according to IRS regulations.
The second requirement is met when the employee documents the expense within 60 days after the expense is paid or incurred. Travel-related expenses must be accounted for within 60 days after the end of the trip and are typically substantiated on a Travel Expense Form. See BPM 505 - Allowable Expenses, for additional guidelines and requirements regarding travel-related expenses.
The third requirement is met when the employee returns to the employer any reimbursement or advance that is in excess of the amounts substantiated or properly accounted for within 120 days after the amount was paid. (Note: BPM 506 states that all cash advances received from the campus cashier or other designated office must be repaid within 21 calendar days following completion of the trip).
If one or more of the above three requirements are not met, the reimbursement or advance to the employee will be included in the employee's wages, subject to tax withholding, and reported to the IRS and to the employee on the applicable form.
The substantiation requirements of this policy also apply to non-employees (e.g., independent contractors) on University business. If the non-employee does not properly account to the University for their reimbursed expenses, then any advance or reimbursement will be reported as income to the IRS and to the non-employee on the applicable form.
For reimbursements to students, Accounting should be consulted, preferably before the expenditure is made.