What is an IRS Accountable Plan?
An IRS accountable plan is an employee reimbursement allowance arrangement or a method for reimbursing employees for business and travel expenses that complies with IRS regulations. Maintaining an accountable plan in compliance with IRS regulations prevents employee expenses from being treated as taxable income.
What IRS regulations apply to an Accountable Plan?
The main IRS regulations that detail accountable plan requirements are:
- Treasury Regulation § 1.62-2 (26 C.F.R. § 1.62-2), Reimbursements and other expense allowance arrangements
- Treasury Regulation § 1.162-1 (26 C.F.R. § 1.162-1), Business expenses
- Treasury Regulation § 1.162-2 (26 C.F.R. § 1.162-2), Travel expenses
- Treasury Regulation § 1.274-5 (26 C.F.R. § 1.274-5), Substantiation requirements
These regulations, along with the Internal Revenue Code (Title 26 of the United States Code), can be retrieved through the IRS website.
Why are expense reimbursements taxable after 90 days?
The IRS requires an employer to require its employees to submit business and travel expenses for reimbursement by the employer within a reasonable period of time following the incurrence of the expenses. Otherwise, the reimbursement is taxable to the employee.
The IRS has indicated that requiring an employee to submit an expense for reimbursement within 60 days of the incurrence of the expense meets the reasonable period of time test. See additional information from external tax advisors.
After considering relevant factors, including benchmarking of peer institutions, financial and sponsor reporting obligations, IRS-related information and the frequency of faculty and staff travel, Carnegie Mellon has determined that, to comply with IRS requirements, it would be appropriate and within IRS requirements to require employees to submit business and travel expenses for reimbursement by the University within 90 days of the incurring the expense or completing the travel.As a result, any request for reimbursement of an expense submitted more than 90 days following the date the expense was incurred or the travel was completed will be treated as taxable to the employee (and subject to income and withholding taxes).
Does an expense report need to be approved within 90 days to avoid taxation?
The latest Oracle submission date is used to determine whether or not a report was submitted after 90 days. If a report is submitted into Oracle on day 90, but it is not approved until day 91, it will not be considered late. However, if a report is submitted in Oracle on day 90, but it is withdrawn and re-submitted on day 91, it will be considered late and will result in tax consequences.It is recommended that all expenses be submitted for reimbursement within 30 days after the travel is completed or the expense is incurred to allow time for processing and approvals.
Sales Tax Information - CMU Business and Travel Expense Policy
Are there taxes for which the University’s non-exempt status is not applicable?
There are also states where the university is not exempt from sales tax.
The policy seems to allow colleges/departments the ability to reimburse sales tax. Please explain.
In what states does Carnegie Mellon have tax exempt status?
Carnegie Mellon is exempt from sales tax in the following states only. The PA sales tax exemption certificate can be found on the Taxation website, however the Taxation Department should be contacted directly in order to receive the appropriate exemption form/certificate for other particular states. If a state is not listed below, Carnegie Mellon is either not exempt from the applicable sales tax or the state does not impose a sales tax.
Colorado, Connecticut, D.C., Florida, Illinois, Kansas, Maine, Maryland , Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia, West Virginia
What happens if I use the university’s tax exemption when making business purchases with personal funds?
Where do I go for specific personal income tax consequences when based at a foreign branch or operation?
CMU Ethics Reporting Hotline
www.reportit.net (Username: tartans; Password: plaid)