Although I have a schedule C business, I paid myself a W-2 salary. How do I determine the correct amount of the qualified business income deduction?

Forum|Forum|6 years ago
June 7, 2019
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a sole proprietor can not pay himself a salary so did you really file a W-2 and 941's. pay withholding, medicare and fica taxes? if so, you have a mess on your hands. your salary would not be deductible on schedule C nor reportable as wages on the 1040. Seek professional help to fix this. There are many issues besides the QBI deduction. I advise not filing your 1040 until this is cleaned up. .

Sole proprietors of businesses are not eligible to receive salaries, as it is prohibited by law. These small business owners thus do not receive W-2 forms. They can use the money in the business to pay personal expenses without adverse tax consequences. (not allowed to deduct personal expenses paid against business income.

SweetieJean

Employee

Please confirm that you have a Schedule C business, not a C Corp (which is different).

Anonymous

Answer

Anastasia-CPA

Where can I find the IRS source on this rule ? I need to send it to my client. Thanks !

ZoltanB45

Sole proprietors, Single member LLC's and Partnerships do not issue W-2's to the owner. It is just a known fact. I would not go crazy if you did it this one time. Record the payroll expense, but going forward, do not pay yourself a salary. Take a draw.

Carl11_2

Employee

You are in an absolute nightmare now, unfortunately. The IRS considers a SCH C business, be it a sole proprietorship or single member LLC, to be a disregarded entity. Under no circumstances and with no exceptions does the owner of such a business issue themselves a tax reporting document of any type. There are no exceptions. You will need to seek professional help to fix this. If your state taxes personal income you've got another nightmare inside the first nightmare. Seek professional help yesterday, if not sooner.