Let’s talk about unreimbursed partnership expenses. An unreimbursed partnership expense are expenses that you pay for out of your personal pocket that you don’t get reimbursed for.

Let’s say you’re a start-up, or let’s say you’ve had a tough year and you couldn’t run all those pass-throughs through the business like normal. You still can take a tax advantage. The way it works is, first of all, this has to be covered in your operating agreement between your partner, in your partnership, or in your S Corp if you are a sole owner.

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Hey, everybody.
Drew McLellan here from Agency Management Institute this week
coming to you from Cleveland, Ohio.
One of the conversations we had in a recent peer group is around
a tax advantage that many agency owners, particularly partners,
don't take advantage of.
And it's called unreimbursed partnership expenses.
So basically what that means, if there are certain things that you pay
for out of your personal pocket that you don't get reimbursed for.
So let's say you're a start up or let's say you've had a tough year
and you couldn't run all those pass throughs through the business like normal.
You still can take a tax advantage.
So the way it works is, first of all, this has to be covered
in your operating agreement between your partner, in your partnership
or in your S Corp if you are a sole owner.
And what it says, basically, is if there are ordinary partnership
or ownership expenses that the business does not reimburse you for,
you can deduct those as a personal expense on your on your taxes.
So that requires a special K-1 form on your taxes.
But let's say you bought a printer for the house
or you ran some expenses through —
it didn't occur to you to pay for your Internet for the year, whatever,
whatever it may be, or it may have been that you had a tough year
and you just didn't have any discretionary
income to run things through the business like you normally would.
Maybe it was travel or something else.
Those expenses can – talk to your tax advisor – those expenses can appear
as a personal expense, as a partner
ownership expense against your taxes.
So what it does basically is it reduces your taxable income
on your personal taxes rather than on your business taxes.
So if you have paid for some business things through the year,
you may want to a) talk to your tax advisor b) modify —
and it's a simple modification — to your partnership agreement
and c) have your tax adviser fill out the K-1 so you can expense
those expenses on the personal side rather than on the business side.
All right?
If it saves you a couple of bucks, it's worth asking.
All right. I'll see you next week.

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