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Partners and Shareholders Reimbursed and Unreimbursed Expenses: Accountable Plans, Schedule E Deductions, M&E

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, March 1, 2022

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This webinar will explain when a partner is eligible to deduct expenses paid personally on an individual income tax return, review the latest rules concerning the deductibility of common business expenses--including travel, meals, and in-home office--and examine critical differences in deducting expenses for partnership and S corporations.

Description

The Tax Act of 2017 suspended the deduction for out-of-pocket business expenses on Schedule A. Still, pass-through entity owners continue to incur costs on behalf of their entities. Expenses for travel and entertainment, office in the home, seminars, and dues are often paid personally by shareholders and partners.

Sometimes, a partner can deduct expenses directly on Schedule E as unreimbursed partner expenses (UPE). To do so, the partnership must have a qualified agreement in place, and the expenses paid must be ordinary and necessary. The rules concerning the deductibility of business expenses are constantly changing, making it difficult for tax advisers and flow-through members to stay abreast.

Recently the restrictions for deducting meals have been liberalized. The IRS explains in Notice 2021-25 which meals are temporarily deductible at 100 percent. Working from home is more commonplace. These rules and methods surrounding business use of home and traveling for business are complicated.

Establishing an accountable plan eliminates the burden of deducting expenses when allowed on an individual income tax return and saves self-employment taxes. The ability of owners to deduct the costs paid personally varies significantly between partnership and S corporations. Making sure all allowable expenses are reimbursed or deducted is critical for owners of pass-through entities.

Listen as Kelley C. Miller, Partner at Reed Smith, explains the latest rules for deducting expenses, accountable versus non-accountable plans, and when and how a flow-through entity owner can deduct out-of-pocket expenses on Form 1040.

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Outline

  1. Reimbursed and unreimbursed expenses
  2. Common business expenses
    1. Criteria
    2. Meals
    3. Travel
    4. Entertainment
    5. Office in home
    6. Other
  3. Accountable plans
  4. Partnerships
  5. S corporations
  6. Best practices

Benefits

The panelist will review these and other critical issues:

  • The latest rules for deductibility of travel, meals, office in the home, and other expenses often incurred by pass-through entity owners
  • When a partner can deduct UPE directly on Schedule E
  • When and how establishing an accountable plan can result in significant savings
  • Differences in deducting business expenses incurred by owners of S corporations and partners

Faculty

Miller, Kelley
Kelley C. Miller
Partner
Reed Smith

Ms. Miller's practice areas include cloud computing, complex federal tax controversies, state and federal...  |  Read More

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