My wife and I registered an LLC last year which is treated as a partnership for tax purposes (form 1065). We are using one room of our house (12%) only for the LLC passing the IRS home office tests. Also, we bought a car after the LLC was registered which we are using 23% for business based on the mileage log. Both the home and the vehicle are personal assets, on our names, not the company. We set up an accountable plan which reimbursed us last year for the business portion of the home expenses (including depreciation) as well as for the business portion of the car expenses (using the actual method including depreciation).

Now when trying to prepare the taxes for the LLC, we're having some doubts if the depreciation should have been included in the reimbursements or not... The initial thought was, since you can use standard method of mileage reimbursement (which includes depreciation), we could include it in both home office reimbursements, as well as the vehicle actual method. In our accounting software (Quickbooks), we treated the home office depreciation portion as "Office Expense" and the vehicle depreciation portion as "Vehicle Expense". Since the assets (home and car) are personal assets used partly for business, they were not included as company assets in the accounting software, only the expense reports reimbursements. However, at the end of the year, after the income and reimbursements, we have a NOL...

Currently using TurboTax Business to prepare the 1065 and importing from Quickbooks. Of course, all the reimbursements show as expenses and are included in the NOL. Since we have a NOL, I tried to fill out the Worksheet in Publication 587 for the home office deduction. Based on the worksheet, the depreciation and expenses won't be allowable and must be carried over in the next year. However, since they were reimbursed already, they became expenses for the LLC. Not sure what needs to be done now.

Was it correct to include depreciation in the accountable plan and reimbursements? If not, should we reimburse the LLC for the depreciation we took already? Since we took depreciation reimbursements (which became LLC expenses), do we need to include any depreciation forms with the 1065 (TurboTax does not seem to include anything, as if depreciation was not there at all and everything was expense)?