How to treat amounts paid out of my pocket for my business

[Raeka]

In my small business (S corp. apt. house), I charged business repair/supply expenses on my personal credit card since I don’t have a business card. I use that personal card 100% for the business to keep it easy at end of year. In my business checking, I had set up some monthly autopay deductions .

At end of year, my total expenses charged to the credit card exceeded the amounts of my autopays.

 The business had a loss of -$4,390.

The total card charges for repair expenses were $10,449 and the amts. of the autopays  were only $7,919.

So the difference was paid by my personal checking in amt. of $2,530. (Any amount owed at end of month on that credit card is automatically paid in full from my personal account)

I also had some non- expense draws in the amount of $1,240.

Is the amount owed to me $2,530 ($10,449-$7,919) or $1,290 which would include a deduction from the amt. owed to me for those non expense draws?

How do I treat the amount owed to me from the business for my payments of its business expenses if I don’t treat it as a loan? Should I add it to retained earnings and if so where do I do that? If on the M-2 worksheet which line?

And do I have to report the non-expense draws as distributions in this scenario? Can I just pay those distributions rather than report them? If so, how do I treat the two amounts and where do I include them?

Thanks very much for any help.

[ThomasM125]

The amount owed to you would be $1,290, the amount you reimbursed the company, less the personal expenses the company incured. If you don't treat the $1,290 as a loan to the company, it would represent paid in capital, which is similar to retained earnings, an equity account. You would enter it on line 23 of schedule L, Additional paid-in capital. It would not go on schedule M-2, as it is not retained earnings. The non-expense draws were offset by the money you reimbused to the company, so you don't have any distributions to report. When you paid the personal expenses, you would have debited shareholder distributions $1,240. When you paid the $2,530 back to the company, you credited the distributions account for the $1,240 and put the rest ($1,290) into paid in capital. So, you don't have any distributions, they were paid back.

[Raeka]

Thank you. So to be clear, if I do want a return on the expensed items I paid for on credit card from my personal account, I list the amount as a shareholder loan to company and then this tax year pay it back to myself and that would be in the amount of $1290? And I don't need to list the $1240 anywhere on the tax form?

Thank you again

[KrisD15]

True, 

the loan would not be a taxable event.