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Old 09-05-2007, 04:59 PM
YogiWatcher YogiWatcher is offline
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Recording reimbursable expenses & 1120S

Hello,

I came across nice article on web that explains in details how to record reimbursable expenses in quickbooks. It also includes behind the scene working of Quickbooks.

This article talks about two methods:
  • The Expense Tab/Expense Account Method - Here expenses are reduced when reimbursed.
  • The Items Tab Method - Here expenses and income are tracked in two different accounts.
My question is what does IRS expect on form 1120S, line 1a (Gross receipts or sale). Does IRS expect us to include reimbursable expenses as income and then later also include it as deduction? Or is IRS happy if we just don't show reimbursable expenses anywhere under income or deduction?
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Old 09-05-2007, 05:07 PM
suzannemead suzannemead is offline
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Reimbursed expenses is not shown as a sale. It would be other income, or a reduction of the expense accounts. You can't claim an expense without somehow showing the offsetting income or the reduction of the expense if you were paid back for it. I doubt it would matter to the IRS which way you do it as long as the bottom line is accurate for them to tax.
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Old 09-05-2007, 09:33 PM
YogiWatcher YogiWatcher is offline
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Thanks Suzanne,

That's what I thought too, but had to confirm. Just to make sure that I understand correctly - I can EITHER show reimbursed expenses as other income and then also deduct them as expenses OR I can just reduce the expenses by the reimbursed amount and not show it as other income.

Now here is little twist - What if some of the reimbursed expenses are for meals when traveling to customer sites out of town.

If I show reimbursed meal expenses as other income then while deducting those meal expenses I get only 50% deduction for meals. But if I reduce my expenses by reimbursed meal expenses then essentially I get 100% deduction for meals. From this scenario it is better for me to reduce expenses (than to show as other income and then deduct it seperately).

Is this right? Does this make sense? How other people handle it?

Thanks for helping.
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  #4  
Old 09-06-2007, 05:24 AM
Joe Williams Joe Williams is offline
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Be careful. Reimbursed expenses are expenses that you "pass" to the customer. The expenses are then claimed by them. If you use rembursed expenses for meals when traveling, then you should not claim any part of them on your income tax, you were "rembursed" for those expenses and you customer is claiming them as expenses on their taxes.
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