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How to record quarterly Self-Employment tax payments in the US

ZDesignZDesign Member Posts: 3

Hi,
I'm self-employed in San Francisco, CA. Every quarter, I pay my estimated quarterly tax payments of which, I understand, half is a business expense. I record them as "Drawing - Allocation for Income Tax".

Question: what's the correct amount to input into Wave?
a) The full amount of the quarterly payment, or
b) Only half, since that's the business expense.

Example: say I pay $1,000 as my Q1 estimated tax payment. Should the transaction on Wave be a $1,000 drawing, or only a $500 drawing.

Thanks in advance for your valuable answers.

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Comments

  • MikegMikeg Member Posts: 995 ✭✭✭

    @ZDesign,
    The entire estimate should be categorized as a draw. The reasoning behind that is that federal and state taxes are not a deduction for sole proprietors.

  • ZDesignZDesign Member Posts: 3

    Many thanks for your quick reply, @Mikeg .

  • Jsinger013Jsinger013 Member Posts: 1

    @ZDesign, does the same still apply if you're an LLC? And what accounting report do draws show up on?

  • MikegMikeg Member Posts: 995 ✭✭✭

    @Jsinger013,
    Yes, generally that is the case. They are pass through entities and therefore do not pay any taxes. Owners drawing or Distributions are located in the equity section of the balance sheet.

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