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Owners Draw for LLC

Hi everyone!

 

I have a single member LLC and need some assistance on owners draws!

 

Is owners draws considered an expense?

 

If not, how do I pay for social security and medicare taxes so that I actually show an income for the year?

 

I own and run my business and I don’t want to show no income when I work all year!

 

Thank you for any help!!

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1 Reply
Vanessa A
Expert Alumni

Owners Draw for LLC

As a single member LLC, what you take as a draw does not affect your taxes. An LLC is a flow through entity, this means basically everything you earn is yours as you are one with the business.  It is reported on a Schedule C on your personal income tax return. 

 

Your SS taxes are based on your profit for the year.  This means, even if you take every bit of profit you earn out of the bank and use it to buy ice cream, chips and a house, it is treated the exact same way as if you left it all in the bank. 

 

Your SE tax which is 15.3% of your income is your Medicare and Social Security tax that you pay as an independent contractor or sole proprietor is not able to be reduced by credits as these payments go to SSA and Medicare instead of in the lump sum pot with the rest of your taxes.  If you were an employee, then your SS and Medicare taxes would be half of the 15.3% because your employer would be paying the other half, but since you don't have an employer to pay the other half, you have to pay the entire amount.  You should be making quarterly estimated payments to avoid penalties on your SE income. 

 

You do get a 50% credit for paying this, but the amount on line 23 cannot be reduced by credits for your dependents. 

 

 

Self Employment Taxes

 

The Self Employment Tax

 

Taking Business Expense Deductions

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