IRS Accountable Plan Rules for Travel Expenses

An IRS accountable plan is a set of expense-reimbursement rules that keeps travel payments tax-free for both the employer and the employee. Without it, reimbursements are treated as taxable wages.

The three-part accountable plan test

• Business connection: the expense must be for a genuine business purpose — not personal travel.
• Substantiation: the employee must submit documentation (receipts, mileage log, expense report) showing the amount, date, place and purpose within a reasonable time (45 days is the IRS safe harbour).
• Return of excess: any amount paid in advance that exceeds actual expenses must be returned within 120 days.

What happens without an accountable plan

A "non-accountable plan" — where employees receive a flat travel allowance with no requirement to document or return excess — makes the entire allowance taxable compensation subject to income tax and payroll taxes. The employer also loses the ability to deduct those reimbursements as a travel expense.

Per diem under an accountable plan

When you use the GSA per diem rates and employees file expense reports showing the destination, dates and business purpose, the reimbursement is automatically within the accountable plan framework. You do not need lodging receipts — only evidence of the trip itself.

How to build a compliant policy

Write an expense reimbursement policy that requires employees to submit a report with the four substantiation points (date, destination, business purpose, amount) within 45 days. Use the GSA per diem rates as your daily ceiling, and require any pre-paid advances to be reconciled and excess returned. PerDiemWise produces itemised, rate-backed trip totals that fit neatly into this documentation workflow.