September 19, 2025

Navigating Reimbursements for Remote Teams: Taxable Vs. Accountable

Your team is working remotely, bringing with it various expenses such as internet bills, home office equipment, and potentially increased phone costs. As a manager committed to supporting your team, you want to cover these expenses. However, the method you choose to reimburse makes a significant difference.

You essentially have two choices:

Path 1: The Simplicity of Taxable Reimbursements

Opting for a straightforward approach, you could issue a monthly "remote work stipend" of, say, $150 through payroll. This method is clear-cut, with everyone aware of the amount they will receive.

However, it is treated as taxable income.

This means:

You will incur payroll taxes.
Employees will have income tax obligations.
The amount will appear as income on the employee's W-2 form.

This approach is convenient but can be costly. A $150 stipend leaves your employees with roughly $100 after taxes.

Path 2: Maximizing Benefits with Accountable Plans

By setting up an accountable plan, you can offer tax-exempt reimbursements to employees.

This approach involves:

Exemption from payroll taxes.
No income tax imposed on the employee.
No inclusion on the W-2.

The organization still benefits from expense deductions while employees receive full reimbursement.

The trade-off? Documentation. Employees must provide receipts, logs, or statements, and any advances not used should be returned. This process, while straightforward, requires adherence to a system.

Reference: IRS Accountable Plans

Choosing the Right Approach for Your Business

Your decision hinges on your administrative capacity and team dynamics.

Avoiding administrative burden? Opting for a flat, taxable reimbursement might be simpler.
Maximizing financial benefits for your team while cutting tax expenses? An accountable plan is worth considering.

Stay informed: some states, such as California, mandate reimbursement for necessary business expenses. Absence of a reimbursement strategy can lead to compliance risks beyond missed financial benefits.

Optimize Reimbursement Tiers

Diversify support based on role requirements by structuring reimbursement tiers:

Base level: Covers internet and phone expenses.
Mid-level: Includes office equipment costs.
Executive level: Encompasses travel, specialized tools, and more.

For business-related expenses that are documented under an accountable plan, the IRS has no qualms.

The Takeaway

There are two main approaches: one offering ease but with tax implications, and another requiring structure for tax exemptions. Both have their merits depending on your goals.

What’s imperative is planning ahead. As remote work becomes increasingly prevalent, selecting the right reimbursement strategy can either lead to unnecessary tax expenses or substantial savings for both your business and employees.

Take Action Now

Our expertise can guide you to the right reimbursement choice—whether it’s establishing a comprehensive accountable plan or refining your stipend approach. Contact us to resolve this efficiently.

Share this article...

Facebook

Twitter WhatsApp LinkedIn Pinterest Pocket Reddit Email

Want tax & accounting tips and insights?

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .