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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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