Sales Compensation and Expense Allowances

Accountable plans

In an accountable plan, the employee may be paid:

• before the expense is incurred, as an advance
• OR
• after the expenditure, as a reimbursement or an allowance

In either case, in order to be qualified as an accountable plan:

1. the expenses must have a business connection: they must have been incurred while performing job duties
2. the employee must account for the expenses within a reasonable time period
3. the employee must return any excess reimbursement within a reasonable period of time

Record keeping

The employer may reimburse an employee for travel expenses on the basis of actual expenditures. In this case, the employee must keep and present proof of all expenditures to the employer.

The employer may also develop an allowance plan where the amounts of the allowance cannot exceed the rates established by the federal government. For further information go to www.gsa.gov.