Step-by-Step Guide to Implementing a Mileage Reimbursement Accountable Plan

Put the written Mileage Accountable Plan on your S-Corp letterhead and sign it as the corporate officer. Keep the signed document in the company’s permanent records.

Grab your Mileage Accountable Plan Agreement!

✓ Google document version (makes a copy to your drive)

✓ Document version (downloads to your computer)

• Standard Mileage Rate Method: Reimburse based on IRS-published mileage rate per business mile driven (e.g., 72.5 cents/mile for 2026). The 72.5 cent rate already covers gas, oil, repairs, maintenance, insurance, registration, and depreciation, so none of those can be reimbursed separately for the same vehicle.

• Business parking fees and tolls are reimbursable in addition to the mileage rate. Commuting costs (including parking at your regular workplace) are not.

• Actual Expense Method: Reimburse based on actual vehicle operating costs (gas, maintenance, insurance, registration, depreciation). Multiply total eligible expenses by your business use percentage. This method requires detailed receipts and mileage logs.

• Keep a contemporaneous mileage log detailing each trip’s date, purpose, starting point, destination, and miles driven.

• If using the actual expense method, retain receipts for all vehicle-related expenses throughout the year.

• For the standard mileage rate: Multiply business miles by IRS mileage rate.

• For actual expenses: Calculate total vehicle expenses multiplied by business use percentage.

Regularly prepare reports summarizing mileage or expenses, total reimbursement request, and attach supporting documentation (logs, receipts).

The S corporation reimburses the amount calculated via business bank account to personal bank account. Record reimbursements as an accountable plan expense (not wages or owner draws).

The Treasury Regulations provided 2 Safe Harbor Options for Reimbursement:

Fixed-Date Method

• Employee must substantiate expenses within 60 days of when they are paid or incurred.
• Any excess reimbursement must be returned within 120 days of receiving it.
• This allows reimbursements to happen at year-end if substantiation is timely.

Periodic Statement Method

• Employer sends statements at least quarterly asking employees to substantiate or return excess amounts within 120 days.
• This method encourages more regular review but does not force monthly payments.

Keep copies of the accountable plan, mileage logs, expense reports, receipts, and reimbursement payments.

Promptly repay any amounts reimbursed over the substantiated expenses or mileage to maintain tax-free status. Employees must return any excess reimbursement within 120 days after receiving it.

Make sure:

• Business connection exists for all expenses reimbursed.
• Records sufficiently document each expense.
• Excess reimbursements are returned.