Frank and Barbara Biehl - Page 16

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               Regulatory Framework                                                   
               The first requirement for an accountable plan is that the              
          expense must be allowed as a deduction under section 162(a).                
          Sec. 1.62-2(d), Income Tax Regs.; see also sec. 62(a)(2)(A).  If            
          an expense satisfies this threshold requirement, it must be                 
          scrutinized under the regulations implementing section 62(c) to             
          determine whether it was paid under a plan that qualifies as a              
          “reimbursement or other expense allowance arrangement”.  Sec.               
          1.62-2(c), Income Tax Regs.  Under section 1.62-2(c)(1), Income             
          Tax Regs., a deductible expense is paid under a qualifying                  
          “reimbursement or other expense allowance arrangement” if the               
          arrangement meets the requirements of paragraph (d) (which                  
          incorporates the business connection requirement of section                 
          62(a)(2)(A) into the regulations implementing section 62(c)), and           
          paragraphs (e) and (f) (which implement the substantiation and              
          return of excess requirements of section 62(c)).  Sec. 1.62-                
          2(c)(2)(i), Income Tax Regs.  If the “reimbursement or other                
          expense allowance arrangement” meets these requirements, it                 
          qualifies as an “accountable plan”.  Sec. 1.62-2(c)(2)(i), (4),             
          Income Tax Regs.                                                            
               Section 1.62-2, Income Tax Regs., simplifies employees’                
          reporting requirements by providing that amounts paid under an              
          accountable plan are excluded from the employee’s gross income,             
          are not reported as wages or other compensation on Form W-2, Wage           

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Last modified: May 25, 2011