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S Corp Tax Deductions


Board Resolutions & Accountable Plan Documentation Needed

Urgent • Tax Season 2025

Why This Matters Now

As your CPA, I want to make sure you're not leaving thousands of dollars on the table or exposing yourself to audit risks. Most S-Corp owners miss deductions simply because they don't have proper documentation.

Protect Your Deductions: Without board resolutions, the IRS can disallow expense reimbursements and reclassify them as taxable wages.
Save $5,000-$15,000+ Annually: Properly structured accountable plan reimbursements convert out-of-pocket expenses into tax-free income.
Audit Protection: Board minutes and compensation studies defend against the #1 S-Corp audit trigger: unreasonable compensation.

1. Board Resolutions - Critical for Audit Protection

Your S-Corporation must have proper documentation authorizing key decisions made in 2025. Without these board resolutions, the IRS can disallow deductions and reclassify reimbursements as taxable wages.

Required Resolutions for 2025:

✅ Board of Directors Resolution

  • Formally documents board composition
  • Authorizes officers and compensation
  • Establishes corporate governance
  • Required for corporate formalities

✅ Compensation Resolution

  • Documents reasonable salary determination
  • Shows methodology for W-2 wages
  • Critical defense for salary vs. distribution split
  • References industry data (BLS, salary surveys)

✅ Accountable Plan Adoption

  • Establishes expense reimbursement policy
  • Allows tax-free reimbursements
  • Must meet IRS three-part test
  • Without this, reimbursements become taxable wages

✅ Health Insurance Plan (if applicable)

  • Documents insurance reimbursement arrangement
  • Proper tax treatment (saves 15.3% payroll tax)
  • Shows insurance as employee benefit

Why This Matters:

  • Protects deductions in an audit
  • Demonstrates legitimate corporation (not "tax shelter")
  • Shows reasonable salary determination
  • Converts taxable wages into tax-free reimbursements

Without proper resolutions, you risk:

  • IRS disallowing expense reimbursements → back taxes + penalties
  • Reclassifying reimbursements as wages → 15.3% additional payroll tax
  • Salary adjustment → could owe $10,000-$50,000+ in back payroll taxes

2. Accountable Plan Reimbursements - Reclaim Your Expenses

You likely paid thousands of dollars out of your personal pocket for business expenses in 2025. Without proper documentation and reimbursement, you cannot deduct these expenses.

What We Can Reimburse You For (Tax-Free):

Option 1: Simplified Method

Expense Category How We Calculate Your Action Needed
Home Office $1,500/year fixed amount Provide: Office measurements, photos
Vehicle IRS mileage rate ($0.70/mile in 2025) Provide: Mileage log for 2025
All Other Actual expenses with receipts Provide: Receipts, business purpose

Estimated Annual Tax Savings: $2,000-$4,000

Option 2: Actual Expense Method (Higher Deduction)

Expense Category What's Reimbursable Documentation Needed
Home Office Actual expenses (mortgage, utilities, insurance) × business % Utility bills, Form 1098, insurance policy, measurements
Vehicle Actual gas, insurance, repairs, depreciation × business % All receipts, business use % calculation
Travel Airfare, hotel, rental car, Uber/Lyft All receipts, trip purpose
Meals Business meals while traveling (50% deductible) Receipts with who/what/where/why
Cell Phone Monthly bill × business use % Phone bills, business use calculation
Education Courses, conferences, books (business-related) Receipts, course description
Computer/Equipment Business computers, software, office equipment Receipts, proof of business use
Supplies Office supplies purchased personally Receipts from Staples, Amazon, etc.

Estimated Annual Tax Savings: $5,000-$15,000+

Real Numbers - What You're Leaving on the Table

Example Monthly Reimbursement (Actual Expense Method):

Home Office (calculated annually, paid monthly) $500
Vehicle Mileage (400 miles × $0.70) $280
Business Meals (3 client lunches × 50%) $113
Cell Phone (80% business use) $96
Office Supplies (personal purchases) $75
Internet (business portion) $40
Education/Books $50
TOTAL MONTHLY REIMBURSEMENT $1,154
Annual Reimbursement $13,848
Tax Savings at 24% + 15.3% payroll $5,444

Without accountable plan: You're out $13,848 and can't deduct it.

With accountable plan: S-Corp reimburses you $13,848 tax-free, deducts it as expense.

YOU SAVE $5,444 in taxes EVERY YEAR.

Next Steps

This Week:

  1. Please connect with Deepak to discuss these options
    • Option 1 (Simplified) or Option 2 (Actual Expenses)?
    • Confirm we should prepare board resolutions
    • Ask any questions you have

Within 2 Weeks:

  1. Gather documentation based on method chosen
  2. Schedule 30-minute call to review everything
  3. We prepare all board resolutions for signature
  4. Calculate your total 2025 reimbursement amount

Before Tax Deadline:

  1. S-Corp issues reimbursement check to you
  2. We file your S-Corp and personal returns with maximum deductions
  3. You save thousands in taxes

Why This Is Urgent

  • Tax Filing Deadline Approaching: We need documentation before filing
  • Money Left on Table: Most S-Corp owners miss $10,000-$30,000 in annual deductions
  • Audit Protection: Proper documentation protects you if IRS audits
  • Retroactive Is Okay: We can document 2025 expenses now (before filing deadline)
  • 100% Legal: This is standard S-Corp practice, not aggressive planning

Frequently Asked Questions

Q: Is this legal?
A: Absolutely. Accountable plans are IRS-approved reimbursement arrangements. Millions of S-Corps use them.
Q: Will this trigger an audit?
A: No. NOT having proper documentation is more likely to trigger problems. This is standard practice.
Q: Can I really reimburse myself for my home and car?
A: Yes, if you use them for business and document it properly. That's exactly what accountable plans are for.
Q: What if I don't have all my receipts?
A: We can work with bank/credit card statements and reconstruct using calendar and business records.
Q: Is it too late for 2025?
A: No. You can create board resolutions and process reimbursements until your tax filing deadline (including extensions).

Let's Talk

I know this seems like a lot, but I promise we'll make it painless. I've done this for hundreds of S-Corp clients, and the tax savings are substantial and immediate.

Your financial success is my priority. Let's make sure you're not overpaying the IRS.

Email Deepak - Let's Get Started Call Now

P.S. If you do nothing else, at least let's get the board resolutions done. They take 15 minutes and protect you from major audit risks. The reimbursements can wait, but the resolutions cannot.