Schedule C Sole Proprietor Question

Forum|Forum|1 year ago
February 4, 2025
3 replies
0 views

For a small business, how do you account for money taken out? If the proprietor had profitable years and decided to take money out (pay herself I guess), how is that accounted for? Schedule C, 1040, whatever?? Since taxes are already paid on the profits on a business, I can't see why money withdrawn would again be taxed. Thanks for any help.

Best answer by Mike9241

you are required to report all income and should report all expenses but the money you put in or take out is not income or an expense.

Mike9241Answer

you are required to report all income and should report all expenses but the money you put in or take out is not income or an expense.

dmertz

Employee

A sole proprietorship is a disregarded entity, so with regard to your tax return there is no accounting of putting in money or taking out money. It all belongs to you as an individual.

VolvoGirl

Employee

Why do you think money withdrawn will be taxed again? Where are you entering it? You don’t give yourself a W2 or 1099NEC form for it. The money you withdraw comes out of the Net Profit. The withdrawal is not reported on your tax return or Schedule C. You pay tax on the Net Profit.

See Schedule C instructions page C-10 for line 26, right above line 30, Do not include….amounts paid to yourself

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