Discussion:How to book S-corp expenses paid by shareholder-employee?
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| While some of these regular expenses I switched now to my corporate credit card, I pay others like gas cost often in cash -> can this be an issue regarding commingling of funds if I do the reimbursement too late? I'm actually not concered about liability issues but only about the IRS voiding the corporation which I heard can occur. Or can I just make a book entry on the date the expense occured (for the shareholder), instead of physically transfering money between personal and corp accounts? | While some of these regular expenses I switched now to my corporate credit card, I pay others like gas cost often in cash -> can this be an issue regarding commingling of funds if I do the reimbursement too late? I'm actually not concered about liability issues but only about the IRS voiding the corporation which I heard can occur. Or can I just make a book entry on the date the expense occured (for the shareholder), instead of physically transfering money between personal and corp accounts? | ||
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| + | {{ForumReplyPost|UserID=Warren|Date=28 June 2006|Text=I think that employee expense accountable plan is the simplest. That's is basically the way that I handle my expenses in my accounting practice. I reimburse myself monthly for all expenses paid and my mileage at standard mileage rate. It is simple and it forces me to account for all of it at least monthly so that I don't let it go a year and lose track of things.}} | ||
Revision as of 21:46, 28 June 2006
Discussion Forum Index --> Tax Questions --> How to book S-corp expenses paid by shareholder-employee?
| 28 June 2006 | |
| I discovered that there are many possibilities to account for expenses paid by the shareholder initially by cash or from his personal credit card. Basically, everybody I ask does it differently, it seems. Very confusing. These are the methods I came across:
(1) Employee expense accountable plan reimbursement (2) Vendor invoice (write invoice to corp for the expense) (3) Contribution of capital (4) Deemed reduction of distributions (5) Loan from shareholder I am asking for opinions (supported by facts, if possible), which of these are possible / legitimate / preferable. Here is my situation: The S-corp uses cash based accounting; the expenses (pre-)paid in 2005 by the owner-employee were mostly travel (gas) cost and miscellaneous items (postage for retail items shipped and charged to the personal credit card by the shipper); also some computer items. Total less than $10k which I now want to reimburse myself from the corp account. QUESTIONS: Can I freely choose which method I use? (I want to avoid (5) to keep things simple, unless the deemed interest does not apply for small amounts.) What is the difference between (3) and (4)? I also read that in case of an S-corp and (1), the corporate tax deduction could only be for the year the shareholder personally paid the expense, not in the year the reimbursement took place; is that correct? Is (2) legally possible? Or is it legally really the same as (1), (3) or (5)?? I assume in ANY case and regardless how it is booked, the deduction is always in 2005 because of the S-corp rules, which supersede the cash based accounting rules, is that correct? (Remember the cash flowed from shareholder to 3rd party in 2005, from corp to shareholder in 2006). What is the really "normal", easiest method to book this? While some of these regular expenses I switched now to my corporate credit card, I pay others like gas cost often in cash -> can this be an issue regarding commingling of funds if I do the reimbursement too late? I'm actually not concered about liability issues but only about the IRS voiding the corporation which I heard can occur. Or can I just make a book entry on the date the expense occured (for the shareholder), instead of physically transfering money between personal and corp accounts? | |
| 28 June 2006 | |
| I think that employee expense accountable plan is the simplest. That's is basically the way that I handle my expenses in my accounting practice. I reimburse myself monthly for all expenses paid and my mileage at standard mileage rate. It is simple and it forces me to account for all of it at least monthly so that I don't let it go a year and lose track of things. | |
