Should I reimburse my S-Corp for personal expenses?

BMBaril · ‎December 10, 2018

My husband & I have used our company bank account for personal expenses a handful of times. I recently learned from our CPA that is illegal & not a good idea. Got it! Totally cool.

Now- what do I do about the transactions we've already made? Should I label them owner's draws/distributions?

Is it a good idea to reimburse the company out of our personal bank account in case we were to get audited in the future?

Rustler · ‎December 10, 2018

When you use company funds for personal expenses, book them to an asset account you create called "due-from-[name]

then you pay back the company and deposit the payment using that same account as the source (from) account on the deposit

View solution in original post

Rustler · ‎December 10, 2018

When you use company funds for personal expenses, book them to an asset account you create called "due-from-[name]

then you pay back the company and deposit the payment using that same account as the source (from) account on the deposit

View solution in original post

Anonymous · ‎December 10, 2018

If you are an S corp, code the expenditures as Distributions and you should be fine.

Rustler · ‎December 10, 2018

ahhh no
distributions are not equity drawing in a corp, distributions are occasional payments approved by the board and noted in the corp minutes.

Anonymous · ‎December 10, 2018

Can't the board approve the amount and pay it to a third party on behalf of the corporation shareholder(s)?

Rustler · ‎December 10, 2018

a distribution lowers the individual overall capital in the corp, in that respect it is like a owner draw which reduces equity.
but a distribution may be all or partially taxable to the stockholder, depending on the amount paid vs the stockholder basis in the corp - that is unlike the equity draw
since a distribution may be tax free, and usually is, the IRS in known to monitor that to insure you are not shorting the feds of payroll taxes, SE taxes, etc etc. Working stock holders in the corp have to be on a salary, commensurate with the local market salaries for that position and responsibility.

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Should I reimburse my S-Corp for personal expenses?