An accountable plan, as defined by the Internal Revenue Service (IRS), is a reimbursement or allowance arrangement for business expenses, including Travel and Entertainment (T&E), that meets three specific requirements to avoid being treated as taxable income: (1)Expense substantiation, where employees must provide documented evidence (e.g., receipts) for expenses; (2)Business connection requirement, meaning expenses must be incurred in connection with performing services for the employer; and (3)Return of unused cash advances on a timely basis, ensuring any excess advances are returned within a reasonable period (typically 120 days). All three elements (Options I, II, and III) are required for a T&E accountable plan.
The web source from the IRS states: “An accountable plan must meet three requirements: 1) Employees must have paid or incurred expenses while performing services as an employee (business connection); 2) Employees must adequately account for these expenses within areasonable period (substantiation); and 3) Employees must return any excess allowance or advance within a reasonable period.” This directly supports Option B, as all three elements are included in the IRS definition.
The IOFM APS Certification Program covers “Tax and Regulatory Compliance,” including IRS regulations for T&E accountable plans. The curriculum’s focus on “peer-tested best practices” and compliance with federal tax laws emphasizes the three IRS requirements, confirming that all three elements are essential.
[References:, IOFM Accounts Payable Specialist (APS) Certification Program, covering Tax and Regulatory Compliance, IRS: “An accountable plan must meet three requirements: 1) Employees must have paid or incurred expenses while performing services… 2) Employees must adequately account… 3) Employees must return any excess allowance.”, ]
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