Single Member LLC - How do I show distributions to owner?

[42Hammer]

I have a single member LLC. I read on IRS.gov that I need to create a schedule K-1 to account for distributions received from the business. I have been directed to use TT business for that purpose. But, TT Business does not allow me to use it for the Single Member LLC designation, but directs me instead to use TT Home & Business. 

So how, do I show the distributions to the owner on Schedule C? I am not considered an employee or contractor, so where does that expense get recorded?

[GeorgeM777 · Accepted solution]

If you are a single member LLC (SMLLC), then for tax purposes, the IRS disregards your entity (the LLC) and considers you to be a self-employed person.  Accordingly, you will complete a Schedule C, Profit or Loss From Business.  You don't want to issue a Schedule K-1 to yourself, and neither do you need to use TurboTax Business.  You can use TurboTax Self-Employed (online version) and create your Schedule C using that application.

While the IRS disregards your entity classification (the LLC), that is only for tax purposes.  The legal aspect of your business is an entirely different matter.  Here, we are just concerned with completing the proper tax return for you as a SMLLC owner, and in that regard, you will complete a Schedule C.  When you enter your business income, you will also enter your business expenses.  

In TurboTax online, select Wages & Income, left margin, then on the Your income and expenses screen, scroll down to Self-Employment and enter your information. 

@42Hammer

[42Hammer]

Sorry, I didn't know where the responses would appear and created another question. But this is helpful, however, I use TT Home and Business Desktop version--not the Online version. I don't see a wages and income section.

Thanks

[AliciaP1]

In TurboTax Home & Business you can enter your self-employment income under the Business tab and Business Income and Expenses.  

However, as a disregarded entity filing a Schedule C to report your business activities, distributions to yourself are not deductible expenses.  See What self-employed expenses can I deduct? for specifics on what can be deducted from your business income.

@42Hammer

[VolvoGirl]

@42Hammer   But let me ask you.  Did you set up your Single Member LLC as an  S  corp?  Then you would need the separate Turbo Tax Business (not Home & Business) to file a 1120 S business return.  And get a K-1 to enter into your personal 1040 return instead of doing Schedule C.  

[VolvoGirl]

If you are not an S corp it is  disregarded entity and you file it on Schedule C in your personal return.  

You need to fill out schedule C for self employment business income and pay self employment tax in addition to regular income tax on it.  The SE tax is to pay Social Security and Medicare tax that wasn't taken out like on a W2.

You use your own name and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all  income is at risk.  After you put in your income and expenses  if your net profit is $400 or more you will pay 15.3% for 2013  Self Employment tax in addition to your regular income tax.  The Schedule SE will be automatically filled out for it.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

Fill out Schedule C here

The Business Tab - Continue

I'll choose what I work on

Business Income and Expenses

Then….

Profit or Loss from Business, click Start or Update

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.  

[42Hammer]

No I did not. Thanks for your responses...they were all going to my junk folder so I had no idea I was getting feedback to my questions!

[42Hammer]

Thanks! Very helpful!