Recording payments from LLC to Me in TurboTax

[taxuser1975]

I'm using TurboTax Home & Business (Desktop Edition) and I have a single member LLC. I'm having issues figuring out how to report payments from my business (LLC) to me personally. I run a social media marketing agency, started last year and did not have any profit so I did not have to worry about this problem. This year things have gone extremely well and I'm entering my numbers into last years TurboTax to try to get a baseline of what I need to get ready to pay (And hopefully to see how I can reduce my taxes before the year is over).

I've done research but still not fully sure how to record payments to myself. There are three options for recording payment in TurboTax, a W-2, 1099 and Contract Labor (Business Expense). None of these really appear to apply to me however.

I think I have three options to pay myself:

1. I call myself an employee and generate a W-2/1099 or something, which seems strange to do.

2. Add to (Business Section) Miscellaneous Expenses, report the total amount of payments to myself. Then head to the (Personal Section) and report Miscellaneous Income in the “Less Common Income” section.

3. I don't report the payments to myself anywhere, and just leave the business income reported as it is without any expenses to myself recorded in TurboTax. This seems strange to not report that I'm taking a withdrawal of $XX,XXX for example however.

I've noticed when I try option 3 in TurboTax my taxes are over double option 2.

If anyone has any advice that would mean a great deal to me, as I'm trying to report things correctly.

[VolvoGirl · Accepted solution]

Sorry unless your Single Member LLC is an S Corp you file it on Schedule C in your personal tax.  It is a disregarded entity.    

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 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

[DoninGA]

If you have a single member LLC that has not incorporated then your business is a disregarded entity for tax purposes.  You report the income and expenses on Schedule C for your business.  You do Not report any payments to yourself.  Your net income from the business is your income.

[taxuser1975]

Thank you so much for that information it's really helpful.

[rjs]

When we say that a single-member LLC is a "disregarded entity," it means that you and the LLC are one and the same as far as income tax is concerned. The LLC is not something separate from you. The LLC's income is your income. You are not an employee of yourself, and you don't report payments from yourself to yourself. You just report the LLC's income as business income on Schedule C of your personal tax return. Your option 3 is the correct way to handle it.

If the LLC has filed an election with the IRS to be treated as an S corp or C corp for tax purposes, then the treatment would be completely different.