Cell phone expenses

[AccTaxMan]

Do they allow a S-corp to reimburse a 100% shareholder for part of his cell phone expenses? The 100% shareholder forwards all the company phone call to his cell phone so the clients can reach him even when he's not at the office. And he also uses his cell phone to make long distance calls for the company because the phone company charges their land line for long distance calls. Can the S-corp pay or reimburse 50% (which is very reasonable based on usage) of the cell phone charges to the 100% shareholder?

[erchess]

Not an Expert

Look in the TTB Deluxe or Small Business book's index for "Accountable Plan Rules" or some such and I think you will find all the guidance you need. I'm assuming that you want the reimbursements not to be taxable to the shareholder and I can tell you that would require that the Corp have in place and follow the rules of an Accountable Plan. I don't know whether it is ok to simply pay him half of his monthly or if you have to use his actual record of calls which is presumably a little more some months and a little less other months.

[oceanlovin'ea]

Accountable Plan

You do have to have an accountable plan set up. This means that board minutes state the corporation will reimburse shareholder for whatever percentage of cell phone bill per month. I don't think you have to separate calls out unless that is what their accountable plan called for. It is their corporation so their choice.

Linda

[Jiggers]

Corporate minutes

You do have to have an accountable plan set up. This means that board minutes state the corporation will reimburse shareholder for whatever percentage of cell phone bill per month. I don't think you have to separate calls out unless that is what their accountable plan called for. It is their corporation so their choice.

Linda

Corporate minutes are very important. They should state that it is mandatory that the employee(s) have cell phones, the reasons why, and that the company will reimburse a % or certain $ amount of the monthly cost.

[AccTaxMan]

Corporate minutes are very important. They should state that it is mandatory that the employee(s) have cell phones, the reasons why, and that the company will reimburse a % or certain $ amount of the monthly cost.

The S-corp is 100% owned by the taxpayer. He's the president, treasurer, secretary...everything. So does the taxpayer just write up the minutes by himself?

Also, I think the next question that the taxpayer will ask me is how a minute should be like. Is there any sample or program available on the net which he can use to write up a minute?

Thank you very much for you guys help.

[erchess]

Minutes

I don't think anyone cares too much what the minutes of a corporation look like as long as they are clean and legible and it's immediately clear when you pick up the piece or sheaf of papers that you are looking at the minutes of the whatever date meeting of the board or meeting of the owners of the corporation. They are usually signed "Respectfully Submitted, John Doe Secretary" and the first order of business at the next meeting of whichever (board or owners) should indicate that the minutes of the last meeting were read and either approved as written or approved as corrected. It should be clear who was at the meeting and it should be clear what decision or decisions were reached and why. If there were more than two people at the meeting then every decision should be moved, seconded, and voted on and who moved and seconded and the total vote should be noted in the minutes. If the business has letterhead I would put the minutes on it but I wouldn't buy letterhead for a business that didn't write business letters often enough to justify having it otherwise. I think I would at least set up Letterhead in the organization's word processing software.

I must insist that in my opinion the accountable plan in play must involve a reasonable and realistic attempt to reimburse only business calls.. Any reasonable and consistent plan for achieving this is ok. It would be possible but not necessary to have him dissect his bill each month and weed out the personal calls. That could of course be dicey if one of his business contacts is also a social contact of some kind such as a relative, friend, lodge or church member, etc. Probably what most people do is count as a business call all calls from anyone who is a business contact despite any other ties they may have to that individual.. Also if on average the phone is used a given amount for business you can just reimburse that percentage of the bill but at audit the taxing agency may very well ask for a representative sample of phone records and an explanation of who each call was to or from. If they are playing hardball they can and will deny all calls from anyone with whom the taxpayer has a nonbusiness bond.

There is a reason the agencies want to rein in what we are doing here. By claiming that calls are for business and are therefore an ordinary and necessary expense of the business we are shielding the dollars spent on this expense from ALL FEDERAL and MANY STATE's INCOME TAXATION. Think about it - the C Corp deducts the money from Corporate Level of Taxation and an S Corp or a Partnership doesn't have entity level taxation. In any case the Accountable Plan shields the reimbursement form taxation to the individual. This is a sweet deal but there are rules and you can't blame the taxing agencies if when they audit they make us document why we treated certain monies this way.