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Level 1

S Corp Employee (owner) Expense Reimbursement

Hello 

Currently using QBO Simple Start & QBOP Full, S-Corp Status

Some quick background

I only provide a Service and I invoice my client for only 2 items. Labor and Expenses. Labor I track to Sales and Expenses are tracked to Billable Expense Income.  (I believe this to be correct)

The expenses are comprised of things like mileage, air travel, car rental, lodging etc. along with a daily meal per diem. These expense items are invoiced as a lump sum but detailed in a separately submitted expense report to my client.

 

This detailed expense report start by being submitted to the Company by the Employee (owner) for reimbursement. The Company then invoices the Client per report.  

Here are my questions :

  1. From a Company standpoint, how would these details be tracked? I would think, working off the employee expense report, there would need to be three categories tracked . Travel, Travel Meals (for tax reasons) and Mileage. Both Travel and Travel Meals would be Expense Accounts but the Mileage would be tracked with QBO "Mileage" feature. Sound Correct? 
  2. To reimburse the Employee (owner) I have been requesting a transfer within my personal account in the exact amount of the expense report which shows up on the Company bank statement as a Debit. This debit is then tracked to Reimbursable Expenses in the account. Should I be doing this a different way for accounting/tax purposes?    

Your Help is Greatly Appreciated!

Solved
Best answer March 23, 2020

Best Answers
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Community Champion

S Corp Employee (owner) Expense Reimbursement

What he referred to is the difference between actual cost and standard mileage deductions on your tax form, not in your books.   Keep track of actual expenses, maybe group them under an umbrella parent expense account for ease of tracking and know the difference of when which way you can switch between methods.

 

https://turbotax.intuit.com/tax-tips/self-employment-taxes/standard-mileage-vs-actual-expenses-getti...

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5 Comments
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Level 15

S Corp Employee (owner) Expense Reimbursement

As a corporation, reimbursed expenses fall into two areas, an accountable plan or a non accountable plan as defined by the IRS. You need to read on those and make a decision which one you will adopt. IRS Pub 463

IMO it is far easier to use a company CC for all payments related to the business. It can be a personal CC that you dedicate to the business (and pay from the business) just do not use it for any, any personal purchases.

 

Mileage is a tax time option. By all means keep a driving log per the IRS regs. Date, start stop times, odometer reading start stop and the reason for the trip.

At tax time, if you use mileage, then you do NOT list the expenses of travel, fuel, hotel, meals, tips, tolls, etc etc.

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Level 1

S Corp Employee (owner) Expense Reimbursement

Thank You for the quick response! 

Definitely an accountable plan. 

The separate CC is a great idea. With all travel expenses on the statement the tracking would be simplified. 

 

Just to be clear, When you state "At tax time, if you use mileage, then you do NOT list the expenses of travel, fuel, hotel, meals, tips, tolls, etc etc." this is because these expenses are already accounted for?

 

Highlighted
Community Champion

S Corp Employee (owner) Expense Reimbursement

What he referred to is the difference between actual cost and standard mileage deductions on your tax form, not in your books.   Keep track of actual expenses, maybe group them under an umbrella parent expense account for ease of tracking and know the difference of when which way you can switch between methods.

 

https://turbotax.intuit.com/tax-tips/self-employment-taxes/standard-mileage-vs-actual-expenses-getti...

View solution in original post

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Level 8

S Corp Employee (owner) Expense Reimbursement

@Cfracer 

I see you are an S-Corp, same as C-Corporation, you must keep business vs. personal separate.

You started on the right track here but see what may be mismatch when you reconcile or audit.

 

I see you did an expense report that you sent to your customer for the non-labor travel expense.

I understand expense report includes Per Diem rates for Lodging & Meals and IRS mileage rates.

 

I agree you should reimburse yourself for exactly that amount as separate payment to yourself...

assuming all those travel expenses were paid with personal funds, if not only pay those amounts.

 

Ideally your ER specifies for your records, which expenses were company-paid vs. employee paid.

Company-paid expenses should not be reimbursed to you of course since that will double count.

 

You want amount on your books to match ER, customer invoice and bank statement paid to you.

Hopefully, your ER is connected to accounting system to make the cost entries and create billing.

 

QB Travel accounts can be as detailed as you prefer, but at minimum for taxes do split out meals,

since you can only deduct 50% of business meals on tax return, and beware of tax law changes.

 

Under COS (GOGS in QB), I suggest these accounts

5000 Direct Labor

5500 Direct Travel - Airfare

5510 Direct Travel - Lodging

5520 Direct Travel - Meals

5530 Direct Travel - Mileage

 

I'm S Corp owner for last decade, accountant for almost 4 decades and done 1000's of ER's since 1985. 

The last line of your plan is where I see the second possible problem. I suggest do not use Reimbursable Expense function in QB.

 

What do you mean when you say:

"Debit on bank statement (not on your books)?"

and "Debit is then tracked to Reimbursed Expenses?"

 

  1. To reimburse the Employee (owner) I have been requesting a transfer within my personal account in the exact amount of the expense report which shows up on the Company bank statement as a Debit. This debit is then tracked to Reimbursable Expenses in the account. Should I be doing this a different way for accounting/tax purposes?    

When all is done, you should see the ER total in COS with Income above that ideally for a larger total.

There is a weird setting in QB for "Reimbursable" that does not record revenue but zeros out the cost.

I have seen clients end up with negative amounts reducing what shows as actual expense, so freaky.

 

The only part of what you said here where accounting must consider income tax return is Travel Meals.

Do not mix into a general Travel account or oftentimes tax person will only count 50% of TOTAL Travel.

This would be contrary to maximizing tax-deductible business expenses.  But always confirm with CPA.

 

 

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Level 8

S Corp Employee (owner) Expense Reimbursement

If he is an S-Corporation, the only expenses on his books should be business expenses, not any personal.

Personal vehicle is not a business expense so should not be an actual expense on his books to begin with.

When you are a Corporation you cannot commingle business and personal expenses nor double-count it.

The cost of POV mileage is what he should record on his books and tax return for that reimbursed expense.

He can't double-count that exact same expense recorded two different ways.  He incurred cost and billed it.

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