The Accountable Plan: Why Every Home-Office S-Corp Needs One

A Simple Way For S-Corp Owners To Cut Costs And Stay Compliant

Running your business out of your home can be a smart move. Lower overhead, shorter commute (down the hall, anyone?), and flexibility to grow. However, as an S-corporation shareholder who also works from home, you cannot simply pay household bills directly from the company checkbook and categorize them as “business expenses.” That’s where an accountable plan comes in.

Contact LBS Tax Services today to work with a trusted accountant in Chandler, AZ, who can set up your accounting plan the right way.

What Is an Accountable Plan?

An accountable plan is an IRS-approved system your S-corp sets up to reimburse you, the shareholder-employee, for business expenses you pay personally. When structured properly:

• The corporation gets a deduction for the reimbursed expense.
• You, the shareholder, receive the Reimbursement tax-free (it doesn’t show up on your W-2).
• Everyone stays compliant—no more treating your mortgage or utilities as if the business directly incurred them.

Without an accountable plan, reimbursements are considered taxable wages subject to income tax and payroll tax. That’s not a road you want to go down.

How an Accountable Plan Works

The IRS requires three key elements:

1. Business Connection – The expense must be ordinary and necessary for business (home office portion of utilities, mileage, professional dues, etc.).
2. Substantiation – You must provide documentation (receipts, mileage logs, or worksheets) to your S-corp.
3. Return of Excess – If the company reimburses more than the actual business expense, the excess must be returned.

Think of it as setting up a reimbursement policy between you and your company—yes, even if you are the company.

Why It’s Essential for Home-Office S-Corps

If you work from home, your S-corp can reimburse you for the business portion of:

1. Rent or mortgage interest
2. Utilities (electricity, internet, water, etc.)
3. Repairs and maintenance attributable to the office space
4. Office supplies and equipment

Here’s the catch: those expenses don’t belong on the company’s books as if they were 100% business. Instead, they should be reimbursed through an accountable plan.

This keeps the business books clean and ensures you get the tax break you deserve without risking disallowed deductions in an IRS audit.

How to Set One Up

1. Write a Policy Draft: A simple document (1–2 pages) stating that your S-Corp will reimburse employees (including shareholder-employees) for substantiated business expenses under an accountable plan.
2. Track the Expenses: Keep a monthly log of your home office percentage (based on square footage or rooms) and apply it to your household bills. For example, if your office is 10% of your home, you can reimburse yourself for 10% of utilities and repairs.
3. Submit Documentation: The shareholder-employee prepares an “expense report” and provides it to the company with receipts or statements attached.
4. Cut the Reimbursement Check: The corporation reimburses you directly. Book it as an expense under “Reimbursed Expenses – Accountable Plan.”
5. File Away for Audit Protection: Save the logs, receipts, and reimbursement records. They’ll back you up if the IRS ever asks.

Benefits of Having an Accountable Plan

1. Tax Savings – Deductions for the corporation, tax-free reimbursements for you.
2. Audit Defense – Shows you’re playing by the rules.
3. Clean Books – Keeps personal and business expenses separated.
4. Professionalism – You run your S-corp like a real business, not a hobby.

Final Thoughts

If you’re an S-corp owner working out of your home, an accountable plan isn’t optional—it’s essential. It’s the IRS-approved way to get tax benefits for your business use of a home while keeping your corporation compliant and audit-ready.

It doesn’t have to be complicated. A short written policy, a reimbursement process, and consistent documentation will protect you and maximize your tax benefits.

If you’re tired of sorting out which bills are business vs. personal and want to set up an accountable plan that fits your situation, reach out to LBS Tax. We’ll help you draft the policy, set up the process, and make sure your S-corp is both tax-smart and audit-proof.

Beyond accountable plans, LBS Tax Services specializes in business taxes, strategic financial tips, and tax advantaged ways to manage your S-Corp effectively. Hiring our team means gaining trusted experts who not only keep you compliant but also help you maximize savings and grow with confidence.