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carol-baker
New Member

Unreimbursed Employee Expenses for owners for a sole proprietor who used their own money, outside of the business expenses.

Can I deduct expenses that came from my personal account, used for the business that I own? I have not reported said expenses yet.
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Accepted Solutions
rjs
Level 15
Level 15

Unreimbursed Employee Expenses for owners for a sole proprietor who used their own money, outside of the business expenses.

If you are a sole proprietor you and the business are one and the same. The money in your business account is your own money, just as much as the money in your personal account. As far as your tax return is concerned, it makes no difference which account you used to pay business expenses. If they are legitimate expenses of the business, you should deduct them as business expenses.

Nevertheless, it would be best to avoid this situation by keeping your business and personal accounts separate, and paying all business expenses from the business account, and all personal expenses from the personal account. One reason is that if you ever get audited it would be messy to have to convince the auditor that payments from your personal account were actually business expenses. It might make the auditor suspicious, and then he or she will dig deeper.

As a sole proprietor, you do not have unreimbursed employee expenses because you are not an employee.

HOWEVER, you mentioned "owners" in the plural. If you are not the only owner, then you are not a sole proprietor, and the whole picture changes. If there are other owners, you have a partnership, not a sole proprietorship. The only exception is if the only other owner is your spouse. In that case, you have a choice of how to treat the business on your tax return.

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1 Reply
rjs
Level 15
Level 15

Unreimbursed Employee Expenses for owners for a sole proprietor who used their own money, outside of the business expenses.

If you are a sole proprietor you and the business are one and the same. The money in your business account is your own money, just as much as the money in your personal account. As far as your tax return is concerned, it makes no difference which account you used to pay business expenses. If they are legitimate expenses of the business, you should deduct them as business expenses.

Nevertheless, it would be best to avoid this situation by keeping your business and personal accounts separate, and paying all business expenses from the business account, and all personal expenses from the personal account. One reason is that if you ever get audited it would be messy to have to convince the auditor that payments from your personal account were actually business expenses. It might make the auditor suspicious, and then he or she will dig deeper.

As a sole proprietor, you do not have unreimbursed employee expenses because you are not an employee.

HOWEVER, you mentioned "owners" in the plural. If you are not the only owner, then you are not a sole proprietor, and the whole picture changes. If there are other owners, you have a partnership, not a sole proprietorship. The only exception is if the only other owner is your spouse. In that case, you have a choice of how to treat the business on your tax return.

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