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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11373
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Ed, I'm wondering if any portion of business-related Meal

Customer Question

Customer: Hi Ed, my name is***** wondering if any portion of business-related Meal and Entertainment expenses are taxable to a shareholder-employee of a Sub-S corp.
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Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi Jules,

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I hold a JD (Juris Doctorate, a doctoral degree in the law), concentration in Tax Law & Corporate law, an MBA (specialization in finance & tax), and BBA from mercer University’s Stetson School of Business and Economics, as well as CFP® and CRPS designations.

I can help here

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Yes, In general, an S corporation can deduct its ordinary and necessary expenses for business travel, entertainment, and gifts.

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Travel expenses include the cost of transportation, lodging, meals, and incidentals such as telephone, laundry, and tips.

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To claim the deduction, the corporation has to maintain detailed records documenting the nature and amount of these expenses. The deduction is claimed on Form 1120S, “Other deductions.”

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If the employee pays and the corporation reimburses, then as long as the S-Corp reimburses employees pursuant to an "accountable plan," it is permitted to deduct the reimbursements as business travel and entertainment expense, and employees (including shareholder employees) are not required to include the reimbursements in their taxable compensation.

Expert:  Lane replied 1 year ago.

From an excellent piece b y the American Institute or Professional Bookkeepers (I'll give you the link) Here's an overview of the requirements of an "accountable Plan."

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Travel and entertainment expenses may be paid by corporate credit card, in which case they are charged directly to the corporation. Alternatively, the expenses may be paid by the employees, who are subsequently reimbursed by the corporation. In both of these cases, most corporations adopt an “accountable plan,” which requires the following:

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1. the employee must pay or incur deductible expenses while performing services as a corporate employee;

2. the employee must “adequately account” for these expenses to the corporation within a reasonable period of time; and

3. the employee must return to the corporation any excess reimbursements. To adequately account for travel and entertainment expenses, the employee must provide written documentation that answers the following questions:

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• when, where, and why was the expense incurred;

• how much was spent;

• and in the case of entertainment, what was the business relationship of the individuals being entertained.

Expert:  Lane replied 1 year ago.

Receipts and/or Credit Card statements are required, of course

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Business meal and entertainment expenses are limited to 50%

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And there ARE some exceptions to the 50% limit, such as recreational or social activities primarily for the benefit of employees,

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Also, providing food and beverages to employees under what's called a "de minimis fringe benefit," like an occasional overtime meal to facilitate an emplopyee to work overtime, the cost of coffee, soda, and snacks for employees, is also fully deductible.

Expert:  Lane replied 1 year ago.

Hope this has helped … let me know if you have questions

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If this HAS helped, (and you don’t have additional questions on this), I'd really appreciate your positive rating … (by using the stars on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

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Thank you,

Lane

Expert:  Lane replied 1 year ago.

Hi,

I’m just checking back in to see how things are going.

Did my answer help?

Let me know…

Thanks

Lane