Accountable Plan Compliance
Session #25
Terry Miller
Presenter Bio
Terry Miller brings years of training and consulting experience
in the nonprofit sector across a broad range of organizations.
His passion is making information accessible to nonprofit
managers, boards and advisors. He received his B.A. from
Antioch College in Yellow Springs, Ohio in 1977, and his M.B.A.
from the University of Portland in 1984. Terry consults with
nonprofits and has a primary engagement with River Network,
a Portland, Oregon-based environmental organization working
to strengthen local watershed groups nationally.
www.TerryMiller.biz
Terry@TerryMiller.biz
62 Rudden Ave, San Francisco, California, 94112-2540
voice: 415-333-6320
American Institute of CPAs
fax: 415-333-6309
Course Outline
Overview, Practical view, Technical Definition
Exploring the Definitions
Per Diems & Allowances
Reporting
Risks of getting it wrong
• Automatic Excess Benefit Transactions
• Unreported Taxable Compensation / Employment Tax
Sources of Info
American Institute of CPAs
3
Accountable Plans Overview
About reimbursement of Employees and Volunteers
• NOT about reimbursement of Consultants
Basics: payments to employees are taxable unless
• Nontaxable Employee Benefit, or
• Paid under an Accountable Plan
Really “accountable procedure”
• no plan document is necessary to qualify
• having a written plan is helpful: control, clarity, facts & circumstances
Same rules for Taxable & Exempt Org employers
• EXCEPTION: Automatic Excess Benefit Transaction rules
American Institute of CPAs
Accountable Plans: Practical View
Mostly common sense / ordinary business practice
Hence, most don’t know what it means, they’re
already doing it
Wrinkle 1: payment only AP if would otherwise be
deductible by employee (if itemizing) as Employee
Business Related Expense
• will discuss more
Wrinkle 2: lavish / excessive vs. discretionary
business decision line seems fuzzy
• Remember Charitable Trust considerations – public benefit
American Institute of CPAs
Accountable Plans: Technical View
Three-prong definition
[Reg 1.62-2(c)(2)]
1. Business connection, and
2. Adequately accounted for in reasonable period, and
3. Any excess returned within reasonable period
If Employer pays in a NON-AP fashion, employee
may only use itemized deduction; not possible to
convert to AP from “below”
American Institute of CPAs
Exploring the Definitions
Business purpose
Adequately accounted for in a reasonable period of
time
Excess returned in a reasonable period of time
American Institute of CPAs
Actual Reimbursements v.
Per Diems & Allowances
Hi/Lo vs. Standard Rates
Full Per Diem vs. M&IE
Employer Per Diem vs. Federal Rates
Actual Expenses vs. Per Diem
Allowances & timely “true-up”
American Institute of CPAs
Reporting: Which / When / Why
Form W-2, Box 1 & Box 12
Form 1099-MISC
Form 990
Form 2106
Form 4720
American Institute of CPAs
The risks of getting it wrong
Employment Taxes on Unreported Taxable
Compensation
• Two rates
Automatic Excess Benefit Transactions
American Institute of CPAs
Automatic Excess Benefit Transactions
History of Section 4958
Overview of Section 4958
The Notion of Automatic Excess Benefit
Transactions
How to avoid?
• Contemporaneous written substantiation of compensatory intent
• Timely reporting of benefits
exploring Examples
American Institute of CPAs
Sources of Information
• Reg 1.62(c)
• Reg 53.4958-4
• Employer Tax Guide, Pubs 15, 15-A,15-B Employees, Wages,
Fringe Benefits
Pub 463 Travel, Entertainment, Gift, and Car Expenses, Chapter 6
“How to Report”
• Pub 535 Business Expenses, Chapter 11: “Other Expenses;
Reimbursement of Travel, Meals, and Entertainment”
IRS 2004 EO CPE Text: “Automatic Excess Benefit Transactions
Under IRC 4958” Brauer & Henzke
• IRS 2003 EO CPE Text: Employment Tax Update – Review of
Current Litigation, Kawecki & Henzke; Pages D-33 – D-36
“Accountable Plan – Recent Case Law”
American Institute of CPAs
Thank you for your time!
In addition to the AICPA website, this PowerPoint and all cited
materials are online at: www.TerryMiller.biz/AICPA-NFP12
(this is an “undocumented” page, not linked-to from elsewhere on
my site).
If there is any other source document or prior workshop materials I
referred to, I am happy to email it to you.
American Institute of CPAs
13