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Cosmos
06-07-2010, 05:48 PM
Hello,

We would like to give stipends to the directors and other managers. I never understood how stipends were categorized as expenses. The directors are also the owners of the S-corp. How are stipends handled on the books?

Can meals during the work day be expensed, I know of many businesses that give money to employees for meals, for example my dad would get $30/day for food when he was a consultant.

Last - can clothing be expensed if not uniform? Like formal clothes that are only used for work.

Thanks ! :)

vangogh
06-08-2010, 09:14 PM
Hi Cosmos. First let me welcome you to the forum.

I'm really not the one to answer your question since it's far from my area of expertise, but I noticed your post hadn't received a response yet and I wanted to reply, just so the thread moves back to the top of the new posts list.

I would like to give you some information too so I'm doing a little research. From what I can tell I don't think what you're wanting to do would be considered a stipend. Most of the definitions I see consider it a fixed and regular payment in lieu of a salary and most references are to students who receive stipends for internships. I know stipends are meant as a way to defray costs of living expenses, but I'm not sure if your situation would qualify.

To a question very much like yours I found this answer


the IRS defines business expenses as ordinary, reasonable and necessary for the business,so food and clothing do not qualify as business expenses

Sounds like the business can't count them as expenses.

Again though I'm hardly an expert. Hopefully someone who knows more about this will find this thread and be able to give you a better answer.

Patrysha
06-08-2010, 09:27 PM
I know the laws are different in Canada and the US but find that many of the basics tend to be the same...and I do know that there a business can deduct clothing that is not wearable as street wear...things like costumes, safety (steel toe boots, low temp gloves etc, overalls, chef's outfits, scrubs. magician and clown outfits etc are allowable expenses but suits for business would not be. I'm sure that would be an easy search on the IRS site if it's set up anything like our CRA site...

vangogh
06-08-2010, 09:33 PM
Those clothes all sound like they're a necessary part of doing business. How would a business suit be classified. Is it considered a necessary part of doing business? And if so how much could you spend. There's obviously a huge difference in price between an Italian designer suit and something off the rack at the local department store.

The individual wearing the suit might be able to count the cost as a deduction, but could the business count it as an expense if they purchased the suit. I don't get the impression that it's considered a necessary expense for the business since people are likely expected to have their own clothing. You wouldn't be expected to have scrubs or even steel toed shoes. You probably would be expected to have clothing to wear to the office.

Just a guess on my part though.

Patrysha
06-08-2010, 10:50 PM
lol Van Gogh i agree with you...I think you missed the part where I said "suits for business would not be"

vangogh
06-08-2010, 11:52 PM
Yep, totally missed that part. Aren't I attentive? :)

Cosmos
06-09-2010, 08:12 PM
Thanks Vangogh and Patyrsha :)

I have heard that clothes is a stretch(pun) and has to be only usable for work.

I was not sure about meals. If I take some staff to lunch - Can we write that off? Or if I take my partners out?

Does anyone know about stipends?! When companies give a few hundred a month to staff to cover supplies etc.. - how is that written off when not salary and can that be given to directors who own the company??:confused:

Evan
06-09-2010, 10:15 PM
Can meals during the work day be expensed, I know of many businesses that give money to employees for meals, for example my dad would get $30/day for food when he was a consultant.

Last - can clothing be expensed if not uniform? Like formal clothes that are only used for work.

Thanks ! :)

If they are shareholder-employees and directors, stipends should be paid in the form of a salary (aka W2 wages). Withholding tax and such must be calculated.

Meals provided for the benefit of all employees can be deducted. If you're asking about providing employees with a meal allowance at work, you can set an arbitrary amount for meals, but all of this is taxable compensation.

And no, formal clothing cannot be expenses as a uniform. Neither can your dry cleaning bill. The Tax Court has handled this one many times before.

Evan
06-09-2010, 10:18 PM
Those clothes all sound like they're a necessary part of doing business. How would a business suit be classified. Is it considered a necessary part of doing business? And if so how much could you spend. There's obviously a huge difference in price between an Italian designer suit and something off the rack at the local department store.

A suit is not a uniform, and it is not deductible.

vangogh
06-10-2010, 02:25 AM
Thanks Evan. I was hoping you'd see this thread since I figured you'd know the answers more than anyone here.

Cosmos
06-10-2010, 01:18 PM
Thanks Evan for clearing that up, even though I wish you answered differently - haha !! :)

Evan
06-15-2010, 03:07 PM
My answers can't always be what you "want" to hear.

My recommendation is to reimburse employees for the actual cost of meals. Get receipts. :)