Expert: Arthur Naman - 4/2/2010

Question
Thank for taking my question.We have an s-corporation and one of the partners had expent extra money advertisement and related expenses for the company out of his own money.Can this be use to reduce his w-2 or k-1 overall income?. Thanks

Answer
This could be an recorded as an expense with an offset to contributed capital. An alternative would be to treat these as though they were incurred via an expense report. Thus, reimburse the partner by check and then record the expenses as such.

As an expense this would reduce the K-1 income for all partners.

There are "creative accounting" methods to reduce W-2 income. The answer as to what to do depends on the requirements of the agreement between the partners regarding wages paid to the partners.

What does the person who will be preparing your annual income tax return suggest?

Please ask a follow-up if needed.