Should I include my savings account which I use exclusively for paying income taxes on gig income?
burdesh
Member Posts: 3
I have a checking account that I use solely for handling gig income and expenses. When I receive gig income, I take a portion of it, e.g, say 20%, and transfer it into a savings account so that I can pay estimated income taxes to both federal and state at the usual times. Should I include this savings account in Wave, or since paying income taxes is considered an owner draw (as I've seen mentioned in some discussions here), should I just leave it outside of Wave since I don't think it impacts Schedule C.
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Hello burdesh. That will depend mostly on your business structure. If you're a sole-proprietorship, as you mentioned, the payment of estimated taxes is at a personal level and not a business expense, as such, the transfer of the % would be accounted for as owner's draw.
However, it doesn't hurt to add the account into Wave since it gives you easy visibility of the funds in both account in one place. Whenever you transfer the 20 percent, you can recorded as an account transfer between your checking and savings account (this is a balance sheet transaction and doesn't affects your Profit & Loss or taxes). When you pay the taxes then you can recognize the owner's draw at that time. Again, all of this really doesn't affect your financials other than showing your savings account on your balance sheet statement.
Feel free to reply or send me an email to bonesfinancialgroup@gmail.com if you have any doubts.
Thank you for your advice. In that case, I think I am inclined to remove the Savings account I use to pay estimated taxes, which should keep things a little more simple to manage within Wave. I appreciate your taking the time to answer. Thank you again!