Question

sole proprietorship and Schedule C

Forum|Forum|6 years ago
August 4, 2019
1 reply
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I have a sole proprietorship and am filing a 1040 with a schedule C for my business. I paid my subcontractors with 1099's but took my compensation as "draws" I can't figure out how to report that as income on my 1040, or do I just add that income to the 1099's on the schedule C or what?????

TurboTax Business Windows

VolvoGirl

Employee

You cannot deduct your own salary or any personal withdrawals you make from your business. As a sole proprietor, you are not an employee of the business.

Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income. If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.

(And if you paid yourself and deducted it as an expense then you would have to include it as income on the same tax return so it would be a wash.)

See Schedule C instructions page 9 for Line 26…Do not include….amounts paid to yourself

http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

VolvoGirl

Employee

You were asking about your income. In case you missed it buried above your Business is a disregarded entity and your personal income is just the Net Profit or Loss on Schedule C. So when you take a draw or cash it's just a sideways move from the business bank account to your personal account. Just moving money from your right pocket to your left pocket. Doesn't go on your tax return. It's all yours in the first place.

VolvoGirl

Employee

Which program are you using? It shows Turbo Tax Business. You can not use that for a sole proprietor schedule C. You need to use Home & Business program. Or actually any of the Desktop personal programs. All the Desktop programs have the same forms. You just get more help and guidance in the higher versions.

But TT Business is for 1120 Corporation, 1120S Corp, 1065 Partnership or 1041 Estate/Trust returns. Not for self employed independent contractors using Schedule C.

Schedule C is part of your personal 1040 tax return.