Please be aware that the IRS requires that specific documentation be maintained and made available regarding the deductibility of business expenses in the event that an examination is performed. When out-of-pocket expenses are incurred by shareholders of corporate businesses, an accountable plan is necessary in order for the business to properly deduct the expense. One practical solution is for the shareholder to submit an expense report to their business listing the out-of-pocket expenses and noting the related business purpose or reason for the expense. Documentation showing the amount paid and to whom should be attached to the expense report before submitting to their business. The business should then issue a reimbursement check to the shareholder for the exact total amount on the expense report. Typical unreimbursed shareholder expenses may include business mileage (not commuting), meals and entertainment (noting the business purpose), travel and home office expenses (exclusively and convenience of the business). Please also note that business expenses must meet other certain IRS criteria as reasonable, ordinary and necessary in order to be deductible.
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