Keep these basic rules in mind when you work in and operate your business as a corporation:

1. You are an employee of the corporation.
2. The corporation is a legal entity separate from you.
3. The corporation is the business.
4. You can incur business expenses on behalf of the corporation.
5. The corporation may reimburse you for the business expenses you incur on behalf of the corporation.

Now, let’s say you incur expenses on behalf of your corporation but you don’t seek reimbursement from the corporation. The corporation gets no deduction because it has not paid for anything.

What About Deducting the Expenses Yourself?

If you were thinking of deducting these expenses as “employee business expenses” on your personal tax return, that won’t work under current tax law.

Won’t Work in 2018-2025

The Tax Cuts and Jobs Act (TCJA) eliminated employee business expenses as a deduction for tax years 2018 through 2025. This means that unreimbursed expenses—such as travel, lodging, meals, mileage, and other business-related costs—are not deductible on Schedule A as itemized deductions.

What about 2026 and beyond? Time will tell, but current indications suggest that lawmakers may extend the non-deductibility of employee business expenses—or even make this permanent.

Only Choice: Accountable Plan Reimbursements

Your best and only option is to submit an expense report to your corporation and get reimbursed. Tax law refers to these reimbursements as taking place under an accountable plan.

With a proper accountable plan, you:

• Get reimbursed tax-free for your business expenses;
• Ensure your corporation gets the full deduction for the expenses reimbursed; and
• Maintain clear documentation, protecting yourself in case of an IRS audit.

How to Structure an Accountable Plan

To ensure compliance, follow these basic steps when seeking reimbursement:

• Keep detailed records. Document all business-related expenses, including receipts, mileage logs, and explanations of business purposes.
• Submit an expense report. Provide a written statement to your corporation with details of the expenses.
• Get reimbursed promptly. The corporation should pay you back within a reasonable time frame.
• Avoid overpayments. If an advance reimbursement exceeds actual expenses, return the excess to the corporation.

Why This Matters

You must respect your corporation’s status as a separate legal entity.

This means honoring corporate procedures—even if you own 100 percent of the stock. Properly structuring reimbursements through an accountable plan keeps you compliant, maximizes tax benefits, and avoids headaches with the IRS.

If you haven’t already done so, put a formal reimbursement plan in place and start submitting those expense reports. It’s the right way to do business—and the smartest way to keep more money in your pocket.

Tools for Your Use

If you are having your corporation reimburse an office in your home, you should use the home office reimbursement form or something similar.

If you are having your corporation reimburse your personal vehicle on an actual expense basis, you should use the employee vehicle reimbursement or something similar.

At Provident CPAs, we specialize in helping clients adapt to changing economic conditions. Whether you’re a business owner or an individual looking to optimize your tax strategy, our team is here to guide you through the complexities of today’s tax landscape. Contact us today to learn more about how we can help you achieve financial independence, even in the face of economic uncertainty.

This post serves solely for informational purposes and should not be construed as legal, business, or tax advice. Individuals should seek guidance from their attorney, business advisor, or tax advisor regarding the matters discussed herein. Provident CPAs assumes no responsibility for actions taken based on the information provided in this post.