Scedule C Profit or Loss from a Business

[dittybag]

I have worked as a consultant for a number of years.

In that capcity I am often retianed by clients as an employee due to state laws requiring officers of the Corp to be an employee and fiduciary. So most years I have W-2 income.

Sometimes I have clients that Pay me by 1099, and a percentage of the ownership in the entity. I have a subS client who pays me consulting income on an ongoing basis, but also lets me share in distributions from my work with 20% ownership in the S Corp and sends me a K-1 as a result.

I also have K-1 income from an LP that I have a small stake in.

In both cases, I work from home, and I am required to have a robust office with the attendant network security and functions one would expect.

Can I combine the 1099 and K-1 income on my Schedule C as income so that my business expenses acn be applied to both sets of income?

[Mike9241]

no, you can't combine your income and enter it on schedule C.  a partnership K1 and has a line to enter unreimbursed expenses (UPE for partnership)

S Corporation Shareholders
S corporation shareholders generally cannot deduct unreimbursed business expenses on Schedule E because the shareholders are categorized as employees when performing services for the corporation.  a change in the tax laws starting with 2018 bar the deduction, in most cases, of employee business expenses. 

[dittybag]

If the Shareholder Agreement for the Sub-S requires a home office for the officer position, and no other office is available, then the company should be able to reimburse the expense  (against documentation) and it should pass to the partner/employee as reimbursement rather than w-2 or 1099 income. Correct?

It should be the same for car allowance. Rather than including that reimbursement in income, it would be OK to give a seperate car allowance (again againts expenses) and not include that in w-2 or 1099 income.

[DavidD66]

The S-Corp can reimburse you for your actual mileage expenses, as long as you submit an expense report to them.  A home office would be completely different.  They cannot reimburse you for the use of you home.  If they pay you for the use of part of your home as an office, that would be rent and you would have to report the rental income.  They can reimburse you for internet, telephone, office supplies, etc. but they can't pay you for the use of your house and call it reimbursement.

[dittybag]

But in this case the "They" (the S-Corp) is me and three other shareholders who have all joined together to use our talents to make a business. In the effort we have a small unheated wharehouse for storage and assembly of product, but shipping ad receiving is done by appointment. Both the ops manager and myself run the business and the other two shareholders do the prototyping and development of product. (they are also vendors for which they are paid on a PO by PO basis. Since the company has no offices, the ops manager and myself maintain offices in our homes and some slow moving inventory strogae in my garage. So the shareholders have agreed the both the ops manager and myself should be compensated in some way for the office expense. So if I read this right, you say we should get months rent checks for the approximate cost of the home office. In that way the cost and the income of the home office would cancel out. Other office expenses can be reimbursed directly through the expense reimbursement protocol of the business. I imagine the same would be with the company truck where it is owned and operated by the ops manager, but gauranteed and paid for by a car allowance agreed by corporate resolution.

If the "rent" gets reported on a 1099 that is fine, it still is not subject to self-employment tax and the income effect would be offset by the retal property cost each year.

[ReneeM7122]

You mention in your questions a schedule C. Please be clear that as an S-Corporation, a schedule C can not be filed.  This is for Single Member LLCs who are disregarded from their owners, or for sole proprietors only.  

You asked, Can I combine the 1099 and K-1 income on my Schedule C as income so that my business expenses and be applied to both sets of income?

If you have an SCorp, you are required to file form 1120-S, not Schedule C.

Please be aware that for S-Corps, there are "reasonable compensation" clauses imposed by the IRS.  Please pay close attention to these because you could lose your S-corp designation.  Please see this IRS link for more information.

In answer to your question, yes, you can get months rent checks for the approximate cost of the home office, and other office expenses can be reimbursed directly through the expense reimbursement protocol of the business. The truck can't be "reimbursed" or paid for by a car allowance agreed upon by a corporate resolution.  It has to be depreciated.