Self-employed Single member LLC and retained earnings.

[cutbanlemon]

As a self-employed single-member LLC, I get checks at the end of the year for income that I will not draw until next year (cash accounting). Do I show this as retained earnings (if so, what line is on schedule), or do I have to claim the income and pay taxes on it this year?

[dsoile]

Hello cutbanlemon

In regards to whether or not you show checks received as income for 2024 tax year, depends on the method of accounting you are using (cash or accrual basis accounting). Since you mentioned that you are using cash-basis accounting, you will report income in the tax year in which you received payments (cash, check, whether the check(s) is(are) presented or not, electronic, etc). Income you received will not be reported as retained earnings, it would simply be revenue, which in turn is reduced by expenses associated with your business, to yield a net profit or loss, which is ultimately what you will report on your Schedule C. In short, you would have to report the income and pay taxes on it for the 2024 tax year.

[VolvoGirl]

Are you filing Schedule C in your personal return or a separate Business return for your Single Member LLC?  Sorry,  If you file Schedule C you report the income the year you receive it and pay taxes.   And report expenses the year you pay them.  That is the Cash Method.  

[cutbanlemon]

Yes, I am using cash accounting, so I must report all income received during the tax year, Jan-Dec, correct? But I don't take it as a draw in the tax year; it stays in my account. Is it income?

[dsoile]

Yes, you must report all the income you received from January through December 2024. Even though the money will just be sitting in your account, it is still income based on the rule for cash-basis reporting of revenue.