How do I deduct business expenses charged to a personal credit card when I have an S corp

[pedz]

The title says most of it.  I have an S corporation which is mostly dormant for the past 14 years.  I'm now trying to get into a new line of business and in the 2021 tax year, I bought things on my personal credit card that I would now like to move into my S corp and expense them.  Is this possible?  And if so, how do I show it on the two tax returns?  I'm using Turbo Tax Corp for the S Corp and Turbo Tax for my personal return.

[Carl]

I have an S corporation which is mostly dormant for the past 14 years.

Have you been filing tax returns for the S-Corp for the past 14 years? have you been filing annual reports to your state as required? If not, my bet is the state has your S-Corp status as inactive, and it's most likely also closed by "involuntary dissolution". So you need to check that first and foremost before going any further.

I'm now trying to get into a new line of business and in the 2021 tax year, I bought things on my personal credit card that I would now like to move into my S corp and expense them.

Depends on what "things" you're talking about. Assets? Inventory? Something else such as renting a store front?

[pedz]

I have been filing tax returns and state returns and sales tax the whole time.  The reason is the corp had debt that needed to be paid off and so I moved money from my personal income into the corp as a loan to pay off the debt.  I also deduced a few expenses.  To rephrase, the corp has been showing a loss for quite some time but I hope will start to show income in 2022.

The "things" (sorry to be vague) are tools, equipment, supplies.

[DianeW777 · Accepted solution]

Yes, it's possible.  Pay yourself for the expenses through the S Corporation and the S Corporation will maintain the receipts and take the deduction for the expenses.  There is no need to show this on your tax return because you are simply being reimbursed by the S Corporation.

Keep in mind that the date the S Corporation pays you will be the year the deduction can be claimed on their tax return.

[Carl]

Thanks for clarifying everything. Your statement of "dormant" for 14 years was a real flag raiser for me. 🙂

are tools, equipment, supplies.

Generally, tools and equipment are assets. So they would be treated as capital contributions to the corp and depreciated appropriately.

Supplies, I assume are consumables. For example, Windex and spirits used for cleaning stuff.

Or maybe it's things used to build product with such as wood, nails, glue etc.?

Depending on what the supplies are, they might be treated as inventory, or as "supplies".

However, @M-MTax has better insight on this when dealing with an S-Corp, than I do. I've flagged him under hopes he'll jump in here with more accurate information for your specific situation. What I've seen is that when someone buys something for the S-Corp, the S-Corp reimburses them for the cost. But then, the S-Corp has to have the money to reimburse with first.

[pedz]

Thank you @Carl ... Your insight and @DianeW777 's basic "the S corp reimburses you" clarifies a lot for me.  The corp use to be all of my income since 1994.  Then I changed jobs.  So I know about inventory, assets, depreciation.  I just had this mental block.  The idea of "reimbursement" never cross my mind.

Thank you to both!