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

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.

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

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

Learning Objectives

After completing this course, you will be able to:

• Identify common deductible expenses often paid by owners of pass-through entities
• Determine when meals are deductible at 100 percent
• Decide when establishing an accountable plan could result in significant savings
• Ascertain key differences in deducting expenses paid by shareholders and partners

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).