I am assuming that you have now established an accountable plan in your S corp. An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income.
The reimbursements are ordinary and necessary expenses reported on your S corp. The reimbursements are not subject to withholding taxes or W-2 reporting on your personal income tax return.
If the 2020 reimbursement is $100, it is reported as a $100 expense on the S corp. The 2020 reimbursement is not a taxable event for your personal income tax return.
You can only deduct expenses in the year that you paid for them. Deductions, income, etc from a previous tax year cannot be claimed with the current year’s tax information. Assuming that the S corp and personal income tax return are reported on a cash basis, you may claim the expenses in the year that you paid the expenses.
On the personal income tax return, if the original expense had been taken as a deduction, the reimbursement for that expense would be taxable income in the year the reimbursement was received.
Perhaps you took a 2016 mileage deduction on Schedule A Itemized Deduction of the that year’s tax return. A reimbursement of that expense in 2020 would be taxable income in 2020.
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