Sorry for delay.
An employer - S-corporation in this case - may reimburse to the employer for employee business expenses
That is reimbursements to the employer - not reimbursement to the shareholder. The fact that the employee is also a shareholder - is not relevant here.
That includes reimbursements for the home office.
Same requirements are for the employee business deductions
Unreimbursed employee business expenses are deducted on schedule A
But when expenses are reimbursed by an employee - these expenses are NOT included into wages.
If you reimburse employees for job related expenses - such reimbursements might be excluded from taxable wages if paid under accountable reimbursement plan.
In order to qualify as an accountable plan, your reimbursement or allowance
arrangement must require that your employees meet all three of the following rules
1. There must be a business connection to the expenditure
. This means that the expense must be a deductible business expense
incurred in connection with services performed as an employee. If not reimbursed by the employer, the expense would be deductible by the employee on his/her 1040 income tax return
2. There must be "adequate" accounting
by the recipient within a reasonable period of time. This means that your employees must verify the date, time, place, amount and the business purpose of the expenses. Receipts are required unless the reimbursement is made under a per Diem Plan.
3. Excess reimbursements or advances must be returned within a reasonable period of time. Reasonable depends upon facts and circumstances.
Reimbursements not made under accountable reimbursement plan must be reported as wages even if paid with a separate check.
If your employer's reimbursement arrangement does not meet all three requirements, the payments you receive should be included in the wages shown on the Form
Regardless if reimbursements are paid under an accountable reimbursement plan OR deduction is claimed on schedule A - there are certain requirements for home office deduction.
Same requirements for employees of S-corporation.
Let me know if you need any help.