I read an article recently that described my "sub-chapter S" corporation paying me rent as an "out-of-pocket" expense under an "accountable" plan for employe business expense reimbursement. Is anyone familiar with this? Does it raise any audit flags if the home office truly meets IRS conditions? How have you set your "accountable" account in QB?
I have never faced this. For me, it is something new.
If you are an employee of your own one-man corporation, whether a regular “C” corporation or a “sub-chapter S” corporation, you have three choices for handling the costs of a qualifying home office:
• You can deduct the costs as an unreimbursed “employee business expense” under “Job Expenses and Most Other Miscellaneous Deductions” on Schedule A. Expenses in this category of itemized deduction are only deductible to the extent that the total exceeds 2% of your Adjusted Gross Income.
• The corporation can pay you rent for the home office.
• The corporation can pay you for the “out-of-pocket” costs of a home office under an “accountable” plan for employee business expense reimbursement
The third option, being reimbursed under an accountable plan, provides the greatest tax savings. It is an excellent way to get money out of your closely-held corporation tax-free. The corporation can deduct the amount of the reimbursement and you do not have to report the payment as income.
This option is “more better” than having the corporation pay you rent for the home office. While your corporation can deduct the rent paid to you, you must report the rent as income on Schedule E.
I am pasting a great link pl read for more explanation. http://www.taxalmanac.org/index.php/Home_Office_Expenses_of_a_One-Man_Corporation If this the answer pl click solved.
I appreciate the answer but it was essentially verbatim from the articel I had read and really didn't get to what I was after. Thanks for your time though and the link. If the link isn't to the same article and offers something new, I will be sure to come back and indicate questions solved.
Let me try again. I hope you did read my above post and the link, this is further clarification for your question.
I don't know why my browser is acting out. I had hard time to post my answer that is the reason I end up posting twice.
An accountable plan: To qualify, your employer's reimbursement must include all of the following.
It is good to keep accountable plan in writing in case of audit.
Business use of Home: Calculate the "business use percentage" of your home office. List each item of expense paid during the month, such as real estate taxes, homeowner insurance, electric, mortgage interest etc. As an S-corp, total up all the expenses listed on the form and write a check to you (employee) from corporation.
Fill out the worksheet in 2010 Pub 587 "business use of your home" Page 25 (you don't have to fill this out, it is just easier and more clarification), Then submit this worksheet to your corporation for re-imbursement. The S corporation record office expense deduction for the check re-imbursement. Don't record home depreciation.
Example: Suppose you fill out the worksheet as your home office is 10% to the total home. Assume following expenses (these are 10% for the total). and submit to the corporation.
As corporation receive above report, it will record these expenses accordingly and write a check to the employee (you)
I hope it solved the question. If it still not the answer, then may be I don't understand the question. Good luck and I hope you will find your answer.
