What expenses qualify for reimbursement under Treas. Regs. §1.62-2(d) Accountable Plan rules?
Title: What expenses qualify for reimbursement under Treas. Regs. §1.62-2(d) Accountable Plan rules? 1 Hi all, my small business has started using an Accountable Plan for the first time since the TCJA made employee business expenses practically useless. I'm trying to figure out what's legit to reimburse my team for without causing issues. Two scenarios keep coming up that I'm not sure about: First, one of my employees works fully remote and has a dedicated home office (about 12% of their house). They just replaced their HVAC system for $8,200 and asked if they can submit the proportional amount ($984) for reimbursement under our Accountable Plan. Second, I have another employee who likes to work from coffee shops 2-3 times a week instead of their home office. They want to submit receipts for their coffee and snacks ($7-12 each visit) saying the coffee shop is essentially a "coworking space" even though they don't have specific client meetings there. Are these legitimate Accountable Plan reimbursements? What's actually fair game under Treas. Regs. §1.62-2(d)? I don't want to be too restrictive but also don't want to cause tax problems.
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StarStrider
9 These are great questions about Accountable Plan reimbursements! The key requirements under Treas. Regs. §1.62-2(d) are that expenses must have a business connection, be adequately substantiated, and any excess reimbursements must be returned. For the home office HVAC situation, there's a distinction between repairs and improvements. Repairs to maintain the home in ordinary working condition could be partially reimbursable based on the office percentage. However, capital improvements that add value to the home (like a new HVAC system) are typically not eligible since they primarily benefit the employee as the homeowner. The IRS would likely view this as additional compensation rather than a legitimate business expense reimbursement. For coffee shop visits, this is tricky. If the employee genuinely needs an alternative workspace for business reasons (perhaps their home office is temporarily unusable or they need different surroundings for creative work), you might justify modest expenses. However, food and beverage costs would still be subject to the 50% limitation for meal expenses, and you'd need documentation showing the business purpose of each visit.
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StarStrider
•15 Thanks for the explanation. So if I understand correctly, basic repairs like fixing a broken window in the home office might qualify at the percentage rate, but major improvements like a new HVAC don't? What about something in between like if they need to replace the carpet just in their office area but not the whole house?
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StarStrider
•9 You've got it right about repairs versus improvements. For something in between like replacing carpet just in the home office area, that could potentially qualify since it's specific to the business space and not benefiting the entire home. The key is whether the expense is primarily benefiting the business use versus adding value to the home overall. For partial improvements, I'd recommend documenting that the carpet replacement was specifically needed for business purposes - perhaps the old carpet posed a safety hazard or was damaged in a way that affected business operations. Having clear business justification and documentation is crucial.
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StarStrider
18 After struggling with similar Accountable Plan questions for our remote team, I found this amazing tool at https://taxr.ai that analyzes expense documentation and determines if they qualify under the accountable plan rules. It saved me hours of research trying to figure out what qualifies under Treas. Regs. §1.62-2(d). You upload your expense policy and receipts, and it tells you exactly what's reimbursable under the Accountable Plan rules. It caught several items that would have been problematic - including a home improvement similar to your HVAC situation that would have been flagged in an audit.
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StarStrider
•7 How does taxr.ai handle the gray areas though? Like the coffee shop scenario mentioned by OP - does it give clear guidance or just flag it as questionable?
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StarStrider
•12 I'm a bit skeptical about any tool that claims to definitively determine what qualifies. The rules around Accountable Plans aren't always black and white, especially with home office expenses. Does it actually cite the specific tax code and regulations it's using to make those determinations?
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StarStrider
•18 For gray areas like coffee shops, it provides risk assessments based on IRS guidance and relevant tax court cases, showing you if something is high, medium or low risk rather than just a yes/no answer. It explains what documentation would be needed to strengthen the business case for borderline expenses. The tool absolutely cites specific sections of the tax code and Treasury Regulations for each determination. For example, with home office expenses, it references both Treas. Regs. §1.62-2 and the relevant sections of Publication 587 on business use of your home, plus any applicable tax court precedents. It's surprisingly thorough in explaining why certain expenses qualify while others don't.
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StarStrider
12 I was initially doubtful about using an automated tool for Accountable Plan compliance, but I gave taxr.ai a try after my accountant kept giving me vague answers about some employee reimbursement requests. The analysis it provided for my situation with Treas. Regs. §1.62-2(d) was incredibly detailed! It helped me create a proper reimbursement policy that clearly defined what qualified. For the HVAC example specifically, it explained why that would be considered a capital improvement to the employee's personal residence rather than a business expense. It also provided clear guidelines on when coffee shop visits could qualify with the proper documentation. Definitely worth it for avoiding potential audit headaches!
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StarStrider
5 After spending nearly 3 hours on hold trying to get through to the IRS for clarification on Accountable Plan rules, I finally discovered https://claimyr.com which got me connected to an actual IRS agent in less than 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent was able to give me specific guidance on Treas. Regs. §1.62-2(d) and confirmed that capital improvements like HVAC systems generally wouldn't qualify even if partially for a home office. They also explained the documentation requirements for alternative workspaces like coffee shops - you need written justification for why the employee couldn't use their regular workspace that day.
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StarStrider
•17 Wait, so this service somehow gets you through the IRS phone queue? How does that actually work? I've been trying to get specific guidance on accountable plan requirements for months.
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StarStrider
•12 I'm extremely skeptical this is legitimate. The IRS phone lines are notoriously jammed - how could a third-party service possibly get you through faster? And even if you do reach someone, most IRS phone representatives won't give definitive rulings on complex tax situations like Accountable Plan reimbursements.
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StarStrider
•5 It uses an automated calling system that navigates the IRS phone tree and holds your place in line. When an agent is about to pick up, you get a call connecting you directly. It's completely legitimate - they don't claim to change how the IRS operates, they just handle the waiting part for you. You're right that not every IRS representative can give detailed technical advice, but they can often provide general guidance on how regulations are applied. In my case, I was transferred to a specialized department that handles business tax questions. They couldn't give me a binding ruling, but the information about documentation requirements was extremely helpful for setting up our policy.
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StarStrider
12 I have to admit I was completely wrong about Claimyr. After our company tax advisor went on medical leave right before we needed to finalize our Accountable Plan policy, I was desperate for guidance on the Treas. Regs. §1.62-2(d) requirements. I tried the service, fully expecting it to be useless. Not only did I get through to an IRS business tax specialist in about 15 minutes, but they connected me with their technical advisor who explained exactly how capital improvements to home offices should be handled under the Accountable Plan rules. They even emailed me reference materials afterward. This saved our company from potentially making a significant compliance error with our reimbursement policies!
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StarStrider
21 I think everybody's overthinking this. The accountable plan rules in Treas. Regs. §1.62-2(d) basically say the expense needs to be ordinary and necessary for the business, properly documented, and any excess needs to be returned. If the company feels that contributing to an employee's HVAC is a legitimate business expense, they can reimburse it. Same with coffee shops - if the business believes having workers in different environments increases productivity and is "ordinary and necessary," then it should qualify. Its all about how you document and justify it.
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StarStrider
•9 There's a bit more nuance here that's important. While the business purpose test is certainly key, the IRS specifically looks at whether the reimbursement primarily benefits the business versus the employee personally. Capital improvements to an employee's personal residence almost always fail this test because they add permanent value to the employee's property. The IRS has consistently viewed these as disguised compensation rather than legitimate business expense reimbursements. Similarly, regular coffee and snack purchases can look like personal meal expenses unless there's clear documentation of why working from that location was necessary for business purposes on each specific occasion.
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StarStrider
3 Has anyone actually been audited over their Accountable Plan? I've been reimbursing employees for home office equipment, internet, and occasional coffee shop visits for years with no issues. As long as they provide receipts and a business justification, I've approved them under our Accountable Plan per Treas. Regs. §1.62-2(d).
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StarStrider
•11 I have a client who was audited specifically on their Accountable Plan reimbursements last year. The IRS was particularly interested in home office-related expenses. They disallowed reimbursements for home improvements (including partial reimbursement for painting and flooring) and reclassified them as taxable wages, resulting in additional employment taxes plus penalties.
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StarStrider
•3 That's concerning to hear. Were they reimbursing for major improvements or just regular expenses? Did the employees have legitimate home offices that were used exclusively for business?
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