Get your taxes done using TurboTax

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

 

Your net profit on Schedule C is your personal income and counts for the EIC.  Oh and you can get in trouble for not reporting your expenses to qualify for the EIC.