Shareholder employee travel expense deductions


C

cihocki

So, cruising around published articles, it is clear to me
that the IRS does NOT allow corporations to reimburse
shareholder employees for travel on a per diem basis, and
meal reimbursements are only 50% deductible by the
corporation. I have several questions regarding both of
these facts:

1) Is there ANY way for me, 100% owner and employee of an S
corporation, to avoid the absolutely monumental record
keeping fiasco that is sure to ensue having to keep receipts
for every single meal I eat during a 6 month remote project
(for 3 years, no less, until the audit window expires)?

2) Seeing as I can reimburse for three meals a day, up to 25
(or is it 75 nowadays?) dollars apiece, without a receipt,
how on earth does it make sense to prevent me from just
using a perdiem in this scenario where the M&IE perdiem will
almost always be less than 75 dollars? Is the published
perdiem rate then the maximum I'm allowed to reimburse while
still unable to just claim the flat perdiem in the first
place? That seems asinine.

3) If, for the 6 months of the project, which is located in
Manhattan, I realize that hotels are prohibitively expensive
(minimum 150 a night plus tax, usually more) and I choose to
rent a room month to month or sign a 6 month
lease/sub-lease, how can I do this in a fully deductible
way? Does the corporation have to sign the lease instead of
me personally? Or can I just submit receipts for rent
payments (from the leasing agency or subleasing tenant) to
my corporation for reimbursement?

4) Let's say I get really sick of flying home from New York
every week and decide to stay there every other weekend.
Would this limit the deductible nature of the rent expense
(if it's otherwise fully deductible)?

5) What sorts of furnishings/utilities/etc are deductible?
Do they have to be in the corporation's name? Do they have
to be in my name? What if it's a shared bill in someone
else's name? Previously, when working for a larger
consulting firm and living in a corporate apartment, my
employer paid for utilities and the apartment was furnished.

I'd appreciate help with any of these issues, researching
all of this has been daunting at the very least.
 
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S

Seth Breidbart

1) Is there ANY way for me, 100% owner and employee of an S
corporation, to avoid the absolutely monumental record
keeping fiasco that is sure to ensue having to keep receipts
for every single meal I eat during a 6 month remote project
(for 3 years, no less, until the audit window expires)?
No. You can simplify the fiasco: each week, take an
envelope, write on the back the date and the amounts, and
put the receipt in the envelope. At the ends of the week,
seal the envelope and total it. You'll have a couple of
dozen envelopes, and a similar number of numbers to
transfer.
2) Seeing as I can reimburse for three meals a day, up to 25
(or is it 75 nowadays?) dollars apiece, without a receipt,
how on earth does it make sense to prevent me from just
using a perdiem in this scenario where the M&IE perdiem will
almost always be less than 75 dollars?
Where is it written that the law must make sense?
Is the published
perdiem rate then the maximum I'm allowed to reimburse while
still unable to just claim the flat perdiem in the first
place? That seems asinine.
A rule saying "You may reimburse actual expenses up to $X"
is a reasonable one (in terms of form).
3) If, for the 6 months of the project, which is located in
Manhattan, I realize that hotels are prohibitively expensive
(minimum 150 a night plus tax, usually more) and I choose to
rent a room month to month or sign a 6 month
lease/sub-lease, how can I do this in a fully deductible
way?
I'd think you could do it the same way you'd rent a hotel
room. Why should there be a difference if it's a long-term
hotel room?
4) Let's say I get really sick of flying home from New York
every week and decide to stay there every other weekend.
Would this limit the deductible nature of the rent expense
(if it's otherwise fully deductible)?
If you stayed in order to save your company the airfare,
there shouldn't be an issue. If you stayed for personal
reasons, it's conceivable (but I think unlikely) that there
would be, since it didn't increase expenses.
5) What sorts of furnishings/utilities/etc are deductible?
Do they have to be in the corporation's name? Do they have
to be in my name? What if it's a shared bill in someone
else's name?
Renting furniture should be fine. For that, utilities, etc.
you need _something_ in your (or the corporation's) name,
even if it's just a "re-bill".

Buying furnishings, and selling (or donating) them when
you're done, providing the total cost of renting,
furnishings, etc. is well under hotel costs (quite likely if
you don't go crazy) I'd say is deductible.

Seth
 
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D

Drew Edmundson

So, cruising around published articles, it is clear to me
that the IRS does NOT allow corporations to reimburse
shareholder employees for travel on a per diem basis, and
meal reimbursements are only 50% deductible by the
corporation. I have several questions regarding both of
these facts:
Please provide a cite that says an S shareholder cannot be
reimbursed for meals using the per diem rate. The current
Revenue Procedure on per diems is 2005-67.

http://www.irs.gov/irb/2005-42_IRB/ar09.html

Thank you,
 
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H

Harlan Lunsford

Drew said:
(e-mail address removed) wrote:
Please provide a cite that says an S shareholder cannot be
reimbursed for meals using the per diem rate. The current
Revenue Procedure on per diems is 2005-67.

http://www.irs.gov/irb/2005-42_IRB/ar09.html
Well, things may have changed, but aren't 5% Sub S
shareholders subject to different rules here? Don't they
have to be reimbursed only for actual costs instead of a
perdiem rate?

ChEAr$,
Harlan Lunsford, EA n LA
 
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D

Drew Edmundson

Harlan Lunsford said:
Well, things may have changed, but aren't 5% Sub S
shareholders subject to different rules here? Don't they
have to be reimbursed only for actual costs instead of a
perdiem rate?
For lodging, yes only actual costs. For meals they can use
the per diem. See Section 6.07. Note that it only says
that 4.01 and 5 don't apply to related parties. The meal
per diem alternative is in 4.02 and 4.03. I believe the S
owners count as self-employed for these purposes so 4.03
would apply.

AFAIK this has been the rule for some time.
 
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