Office In Home

[Greta]

Husband and wife have an S-corporation they run from their home (300 sq ft out of 3000 sq ft home). Is there any way to take a deduction on the S-corp?

[qbteachmt]

The employee would submit an accountable expense report, the employer would reimburse for those costs, and the corporation thereby has expenses incurred to report.

[Greta]

Expenses submitted would be similar to those in Form 8829? How about the depreciation portion?

[TaxGuyBill · Accepted solution]

Yep.  The employee/shareholder can fill out a 8829 every month and use that for the monthly reimbursement under an Accountable Plan.

Unfortunately, it is too late to do much for 2021 now, because Accountable Plan reimbursements need to be done on a timely basis.

[dascpa]

The posts about an accountable plan are correct.  The technical issue I had with the IRS under audit is whether there was an accountable plan signed plan document under Reg. 1.62-2. The act of reimbursing is not the same as the company having an accountable plan.  There are many templates online for free.  Every business client we have should have a signed plan document.  Without it, the IRS may or may not accept the action of reimbursement.

Here is a sample below.

Accountable Plan for Business Expense Reimbursement

ABC Company, Inc. (the Company)

PART I: ACCOUNTABLE PLAN

ABC Company, Inc. desires to establish an expense reimbursement policy pursuant to Reg. 1.62-2, upon the following terms and conditions:

1. Except as otherwise noted in Part II below, any person now or hereafter employed by shall be reimbursed for any ordinary and necessary business and professional expenses incurred on behalf of only if the expenses are adequately substantiated as required by the Company policy on expense reimbursements. (See policy memo.)

1. Under no circumstances will the Company reimburse employees for business or professional expenses incurred on behalf of the Company that are not properly substantiated.

1. The Company and employees understand that this requirement is necessary to prevent our expense reimbursement plan from being classified as a “non-accountable” plan.

1. All expenses must be substantiated within a reasonable period of time.[1] See our Company policy statement of substantiation for what constitutes a reasonable period of time.

1. All charges to company credit cards must be substantiated in the same manner as the above-mentioned reimbursements.

1. Advances that are not substantiated within a reasonable period of time must be returned (paid back) within a reasonable period of time.[2]

PART II: EXCEPTIONS TO ACCOUNTABLE PLAN

Notwithstanding any term or condition in Part I of this document, the following persons, expenses, or arrangements are not considered to be covered under this accountable plan and are subject to terms and conditions of a separate expense reimbursement policy:

1.       1.                                                                                                                                                       
2.       2.                                                                                                                                                       
3.       3.                                                                                                                                                       

      Company officer:                                                                                       Date: 

[1] Must be 60 days or less after the expense is pair or incurred if the company wants to qualify for the “fixed date” safe harbor substantiation rule.

[2] Must be 120 days or less after the expense is pair or incurred if the company wants to qualify for the “fixed date” safe harbor substantiation rule.