Which statement correctly describes an accountable plan for reimbursements?

• A. Reimbursements must be substantiated; excess reimbursements are returned and not treated as wages
• B. Reimbursements require no substantiation
• C. Reimbursements are always treated as wages
• D. Reimbursements are never allowed

Answer: (A)

An accountable plan preserves reimbursements as non-wage if the expenses are business-related and properly handled. The key requirements are that the employee substantiates the expenses with receipts or a detailed report and that the employer returns any excess reimbursement. When these conditions are met, the reimbursements are excluded from wages and aren’t subject to withholding or payroll taxes. That’s why the statement is correct: reimbursements must be substantiated, and any excess must be returned and not treated as wages. If those rules aren’t followed, the reimbursements become taxable wages.