Many of you may have S corporations that are operated from your home. With tax reform, employee business expenses have been eliminated from itemized deductions, so your expenses have not been utilized. While home offices in S Corps are tricky, there is a way to have the business pay and deduct home office expenses via accountable plans.
An accountable plan is a plan that allows an employee to keep track of expenses that are paid personally but are for the benefit of the business. These expenses are then reimbursed to the employee from the employer/business. The accountable plan works best in small S Corporations with few employees.
The home office is the most common expense. Using an accountable plan, you can deduct the business portion of your home office expenses. This includes, but is not limited, to scanners/printers, computers, office furniture, mortgage interest, rent, property taxes, insurance, utilities, and repairs and maintenance.
The reimbursements should be requested using some sort of template or standardized form, and the reimbursements should be made within a reasonable period of time (60 days). If you have any excess reimbursements (i.e. you used an estimate for reimbursement), they should be returned within 120 days.
There isn’t a “one size fits all” accountable plan; in fact, an accountable plan doesn’t even have to be in writing. However, each business should come up with their own accountable plan and the terms to specifically fit their business. There are templates available to help structure your own accountable plan for your business, and adequate recordkeeping needs to take place at both the entity and individual levels.
If you have any questions regarding accountable plans and if they would suit your S corporation, please contact our office.
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