Do you incur business related travel expenses on behalf of your S Corporation?
Are you an employee of the S Corporation?
Do you have your S Corporation reimburse you for these travel expenses?
If you answered yes to the first two questions and no to the last question, then you are costing yourself some precious tax deductions.
By not claiming a reimbursement, the S Corporation does not get to take a tax deduction for the travel expenses.
Instead, you are left with claiming the travel expenses as an unreimbursed employee business expense on Schedule A of your individual tax return and the expenses are reduced by 2% of your adjusted gross income. Worse yet, the IRS may disallow you from even claiming the expenses on Schedule A in the first place because you failed to seek reimbursement from the S Corporation. If that isn’t bad enough, you can’t deduct the expenses for purposes of the AMT tax.
At Gedeon Law & CPA, we’ve developed a simple strategy to ensure our clients S Corporation take a full tax deduction for the travel expenses while the owner receives a tax free cash reimbursement. We recommend clients create an expense report using an app such as Expensify (our favorite) to track all the expenses incurred personally by the owner while traveling for business on behalf of the S Corporation. From there, the expense report is submitted to the S Corporation for reimbursement.