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What's An Accountable and Non Accountable Plan With Employees? - YouTube
Channel: Toby Mathis Esq. | Tax & Asset Protection
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- [Toby] You repeatedly mentioned
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having an "accountable plan"
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but I didn't understand what that meant.
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Exactly what is this, how is
it formed, described, executed?
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What should the plan address?
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Okay, an accountable plan, in a nutshell,
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has to be entered into between
an employer and an employee.
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In the accountable plan it's going to say,
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you account for certain expenses
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and we're going to reimburse you for them.
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- [Jeff] Whereas a non-accountable plan
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is usually some kind of allowance
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that you're giving your employee.
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I'll give you $1,000 a month for--
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- [Toby] A car.
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- [Jeff] For a car.
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- [Toby] Yeah, that's great example.
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But, the accountable plan is
not taxable to the recipient.
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So if I give you $1,000
for a car and I say,
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hey we're going to give
you a $1,000 car allowance,
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that's taxable to you.
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Still deductible to the employer
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but it's taxable to the recipient.
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The employer feels really
benevolent but really
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what they did is they gave you $1,000.
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In an accountable plan we say,
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hey turn in your mileage
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and we're going to reimburse
you 54.5 cents a mile.
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You don't pay tax on it
and we get to write it off.
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- [Jeff] And it's the same for
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almost any reimbursement
that you're going to do
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between yourself and your employee,
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or between the company and the employee.
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Your medical reimbursements, they need to
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show you evidence of
their medical expenses
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for the being accountable plan.
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- [Toby] Yup, now here's
where it gets really fun.
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Now so this is really
important by the way guys.
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The reason I talk about accountable plans
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is 'cause they're only available
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if you're the owner
operator, you've got to be
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an S-Corp or a C-Corp.
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It does not work if
you're a sole proprietor
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or a partnership and I say
that till I'm blue in the face
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but the accountant sometimes
just refused to get this.
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It's like, an accountable plan has to be
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an employer employee relationship.
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You cannot be an employee of
your own sole proprietorship.
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You cannot be an employee
of your own partnership.
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You're either the proprietor
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or you're a partner in those situations.
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If you want to be an employee,
you're an S-Corp or a C-Corp
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or an LLC taxed as an S-Corp or C-Corp.
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Alright so that out of the way.
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Now the accountable plan
could do things like
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reimburse you for your cell phone
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and you don't have to pay any tax on it
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as long as it's at the
convenience of the employer.
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It can do things like
reimburse you and say hey,
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we need you to have a computer
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so we'll reimburse you the computer.
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We need you to have a home office
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so they reimburse you
for the use of your home.
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There's lots of little
things that become deductible
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when you have an accountable plan
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and it does have to be in writing
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and it has to be something
that is can't discriminate.
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It has to be for people that
are doing certain activities
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so I can't decide to be willy
nilly and just get myself
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a huge amounts of benefits
and close everybody else.
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It's no, you're giving it your employees
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and you're saying hey if
you're in this category,
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like if you're somebody who travels,
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then I'm going to
reimburse your cell phone
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and your computer and reasonable internet
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and any of your expenses
while you're out on the road.
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You know, if you have to
get meals and lodging,
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then we'll reimburse you for those.
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If you have to use your car,
we'll reimburse you for that,
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if you have to rent a car,
we'll reimburse you for that,
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if you need to get plane tickets,
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we'll reimburse you for that.
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All those things become reimbursable.
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Isn't that fun?
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And by the way, somebody said that it's
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available on the portal, no
it's actually in our document.
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So when I create a plan, when
I actually create the entity,
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that's part of your organizational
meeting almost always,
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I always do it for you guys
if you're one of our clients.
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