Question

Downpayment for 1099 in 2021

Forum|Forum|5 years ago
March 1, 2021
1 reply
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Hi, me and 2 partners have a LLC s-corp partnership that creates educational videos for universities. We ask for a %25 percent down payment which we hold in our bank account and payout on 1099s freelance designers and ourselves as we complete each section of the project. Since this down payment looks like company profit but really is just pass through to 1099 and only maybe 20 percent will be company profit the re will be payed out in early 2021. I am unsure how to reflect that this cash on hand in our bank account is not profit but held monies for 1099 distribution and only a portion will be company profits.

TurboTax Business Windows

M

MinhT1

If your S-Corp is reporting on a cash basis, the down payments received from your customers are entered as gross income.

The payments you make to the designers (including the shareholders working as designers) are entered as business expenses under Payment to contractors.

There may be a timing difference between the cash receipts and the cash disbursements, but this is normal when you are on a cash basis.

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