Partial Business Expenses, Internet

[Cdmir]

Hello, 

This year I have started my own LLC and recently acquired a business line of credit. I am trying to do everything correctly and putting the clear business expenses on the card. 

In reading these forums, I've read about the itemized version of business expenses and determined that my home internet service would partially meet this requirement, three days of the week when I use it for business. My questions related to this are these:

1. If my Internet costs are $100/month and the use of the service for business is 3 days of the week, my figure for that would be 42.86 per month as a business expense Is that correct?

2. Should I pay for the internet with my business credit card or continue to pay for it with my personal card, knowing that only a portion of the expense is business related? If I do not pay it with my business card, what's the easiest way to show that reimbursement from my business to myself. 

I am the sole member of the LLC, for reference. 

Thanks for your assistance in advance. 

[RSUMan · Accepted solution]

You are allowed to deduct the ordinary and necessary expenses that you incur in connection with your LLC business.

Internet access is certainly an ordinary and necessary expense.

1.  Your allocation of 3/7 of your monthly internet bill is a reasonable method to allocate the expense since you are using the internet 3 days of every week (3 divided by 7 multiplied by your $100 monthly bill equals $42.86).

2.  Pay for your internet with your business credit card.  A single member LLC is a "disregarded entity" for IRS purposes so you will file the business on Schedule C.  There is no need to implement a reimbursement process; just adjust your total expense downward for internet access when entering your expenses for the business on Schedule C.

I do like the idea that you are working to make your business accounting simpler by getting all expenses on the card; that is why I suggest that you pay for the internet on the card, that way you will not forget to enter internet expense when you do your tax return.

[user17598795607]

I'm a little confused. So if someone pays using the business credit card but then adusts the expense lower on the tax return, wouldn't the business still be paying 100% of the internet bill but only reporting part of it to the IRS? 

I'm just trying to understand because I have a very similar situation.

[RSUMan]

A single member LLC is a "disregarded entity" for IRS purposes.  As a result, the payment method is irrelevant to the way the expense is entered on the tax return (you pay cash; you pay on your own MasterCard; you pay on a Capital One MasterCard with XYZ LLC on it).  The IRS looks at the payment coming from the taxpayer and the amount of the business expense gete entered on Schedule C.

[user17598795607]

It seems like lying to the IRS to have the company credit card pay for the bill but only report a portion of it on schedule C? I just want to make sure I set things up correctly from the start. Thank you for responding!

[Michael652]

Yes, your calculation is correct—3 out of 7 days is roughly 42.86% of your $100 monthly internet as a business expense. You can continue paying with your personal card and then reimburse yourself from the LLC, documenting it with a simple expense report or journal entry showing the business portion. Just keep clear records for taxes.