@cjcarter25
he can't take a deduction in 2023 for those expenses because he is an employee and the deduction for their business expenses is not allowed for Federal purposes through 2025. Some states do allow the deduction. However, it appears that the S-corp could establish an accountable plan in 2024 and reimburse prior year expenses after the plan is established.
Sorry but with an S-Corp only it can deduct these expenses with an accountable plan. Setting these expenses up as a loan on the books probably won't work because if using the cash basis these expenses weren't paid and backdating to have an accountable plan can be a serious breach of the tax laws. Also, the other s/h would absorb as a deduction against the S-Corp's taxable income of 1/2 of your expenses and vice versa regarding the other s/h's unreimbursed expenses. What if the other s/h objects?
Note from the AICPA thread what rules must be followed and the types of expenses that can be reimbursed. Once established, if the rules are not followed and the IRS audits there could be severe tax consequences.
see this link from the AICPA on accountable plans.
https://www.journalofaccountancy.com/issues/2020/feb/employee-expenses-accountable-plan.html
and from the iRS
https://www.irsvideos.gov/Governments/Employers/WhatyouneedtoknowaboutAccountablePlans#:~:text=An%20...
