Accountable Plan
I am an S Corp Midwifery practice. I spend 96 hours a quarter training an apprentice who is from an underserved population. I do not get paid for this service. At a basic fee of $25/hour this is $2400/quarter. Can this be used on the accountable plan as out of pocket expenses?
Quick Answer:
No. Under IRS regulations, you cannot deduct the value of your own time or services as an expense, nor can it be reimbursed through an accountable plan.
An accountable plan is strictly for reimbursing actual out-of-pocket business expenses paid by an employee (including an S Corp owner-employee). Since no cash left your pocket to pay for this training, there is no "expense" to reimburse.
Additionally, the IRS generally does not allow a tax deduction for the value of donated services or "lost income," even if provided to underserved populations or charitable organizations.
To derive a tax benefit from this arrangement, the S Corp would need to pay the apprentice a wage (if they are providing services to the business) or pay a third-party trainer, both of which would be deductible business expenses. However, your own uncompensated labor remains non-deductible.
Note: This answer is provided for convenience only. It is important that you speak to a CPA about your individual tax situation.
