Types of Reimbursement Plans
This type of plan reimburses employees or is given an allowance to cover expenses, amounts paid under accountable plans are not shown on the employee’s W-2. It is considered accountable if ALL the following conditions are met:
1. There must be business conditions for the expenses
2. The employee must either substantiate or be deemed to have substantiated the expenses i.e. show receipts/invoices
3. The employee must return to the employer the amounts in excess of the substantiated expenses within a reasonable time
Reimbursements under this plan are included in the employee’s income, therefore it appears on their W-2 form. Unreimbursed expenses can be only deducted by the employee if it meets one of the following categories stated earlier. **
As an employer, it’s a good idea to put your reimbursement plans in writing in the employee policy and procedures manual!