Can I deduct for work I personally did in my business

[raggaeboys]

I do all the IT work for my business, can I create an invoice and charge it back to the company? At the end of the year would this be seen as a deduction?

[Opus 17]

No.  You never take a deduction or business expense for the value of your own labor.***   The tax benefit of doing your own labor is that you have more profit after expenses--your expenses are lower since you did not hire someone else to do the work.

(Even if you could do this, you would deduct the expense on schedule C for your business and then you would need a separate schedule C for yourself as an IT person, report the income and pay all the tax on it. So the net result is exactly the same.  Just asking the question shows a gap in your understanding of the tax issues of being a sole proprietor and suggests you might benefit from some tax books or accounting classes on the subject.)

***If you are organized as an S-corporation, you must pay yourself a reasonable wage for all the work you do for the corporation, and pay FICA and medicare tax on it, and issue a W-2, before you can take a distribution of the profits.  You can't take the profits as a capital gain to avoid paying FICA and Medicare tax, you must pay yourself a fair wage first.  In this case, the wage would apply to all your activities for the company as its employee, not just some of the things you do.

But I don't think you are an S-corp asking about your W-2 wages, from the way you asked the question. 

[raggaeboys]

Thank you for replying. I would benefit from a class. I am a novice. I don't do any of my own taxes but the question I ask ran across my mind. I'm an S-corp. You sound very knowable and I thank you for clearing this up for me, I really appreciate it.

Thanks

[Opus 17]

So if you really are an S-Corp, you need to get to an accountant before the end of the year, To help you set up your books and make sure you’re doing everything correctly. You must pay yourself a fair salary for the work you do and this is an expense on the books of the S Corp.  but it’s not just one specific task, it’s everything you do; you may be the “CEO“, the prime contractor, a service provider, or anything else that your business does.   You must have a W-2, and you must have anything else that state law requires that you provide for employees, such as unemployment insurance or Worker’s Comp.

I’m not particularly well-versed on S corporations and hopefully someone else will wander over and give some more information.

[raggaeboys]

Thank you for all your wise words. You truly know your stuff.

[Carl]

I'm an S-corp

You need to get with an accountant or tax professional yesterday, if not sooner. While you can be a W-2 employee of the S-Corp, your business is required to follow certain specific state and federal laws or risk some pretty hefty fines that your will "WILL" feel.

For example,

- you are required to submit quarterly tax payments to the IRS, as well as to your state if your state taxes personal income.

- You are required to submit a "yearly report" to your state's division of corporations each year, and there is a filing deadline on that report (In Florida, the deadline is May 1st and there are absolutely positively no extensions; not even for COVID-19)

- Corporate tax returns are due March 15th each year, (A full month before the personal return deadline). The late filing penalty is $200 per owner/member of the corporation, per month. There is no automatic extension for this under any circumstances, including COVID-19.

There are many, many other laws, rules and regulations that you must follow too, and you will be heavily fined for not doing so. So get with a professional ASAP, as the cost of professional help will seem like a pittance when compared to the potential fines and penalties you could incur.

I have seen a fair number of people go the S_Corp route without first educating themselves, only to end up bankrupt after getting all those fines and penalties assessed.Don't be one of those people.