Single Member LLC & Self Employment Tax HELP!
mlzorko
Member Posts: 2
I have been using Wave for 5 years now as a sole proprietor. However as of January 1st, 2019 I became a single member LLC. I use the LLC as a pass through. Here is my dilemma.
Facts
- I have 10 customers that pay me a monthly fee
- I have 6 simple monthly business expenses
- I take income - minus monthly business expenses = taxable income
simple right! I agree - however his is where it gets complex.
I need to log the following transactions
1. Federal 28%
2. Self Employment Tax: 15.3%
3. State: 4.95%
However, In Chart Of Accounts - I can't find a single spot to create these three categories. My only option is to create expense accounts for each one...AHHHH yes, I did that for 2018. That is making taxes tough because I have to isolate these things in my reports. Is there a way to do the following, and do it right?
What I would like to see happen:
Receive Income
Deduct monthly expenses
= Taxable Income
Deduct my three taxes
= What I pay myself
If ANYONE could assist me here I would be very grateful - and may even buy you a pizza!
Comments
I had the same problem, and I can't say that I've solved it, but I'm sort of kicking at pieces of Waveapps to see what works. What I did was to create a virtual account. I went to Accounting>Transactions ... then at the top, on the right, I chose "More," and then "Journal Transaction." That gives you an ability (right hand column) to assign a debit and a credit, which are counter-intuitive because this is a liability account. I called it "Quarterly Tax Holding Account." My "debit" was "Income," in my case "Uncategorized Income." The "debit" side was my Checking Account, where all of the income comes into. The "credit" side was that "Quarterly Tax Holding Account," where I was stashing the IRS' money. "Then the amount of the journal entry was what I calculated as 35% of the total for the month. What it certainly did__ was to give me an account that told me how much I'd put aside. _What I would like to think this did was to take this out of my "Transactions" balance so I don't spend it. This account shows up as a "Liability" account on my Income Statement. I've e-mailed Wave to see if I did it right, but so far, no joy. IF ANYONE OUT THERE HAS SUGGESTIONS, PLEASE LET US KNOW!
Guess I'm not sure why you would need to create tax expense accounts for sole proprietor or single member LLC (same thing both 1040). The taxes are not deductible expenses of the business. They are personal and were generated by the profits of your business. Taxes paid by the LLC or proprietor such as property taxes or deductible by the entity.
Following up my comment ... I was wrong. Don't anybody follow this direction.
Belbein,
To help with budgeting and not being surprised by taxes at the end of the year, every month or qtr whatever works best for you, look at your profit year to date multiply by your rate. Hope fully the cash is there and not needed for operations. Establish another bank account and move the cash there. I have clients with Tax Savings Account or something along those lines. Hope that helps.
SIDE NOTE:
The net profit doesn't have to = What I pay myself.
There are a few options:
1) Stays in business as owner's equity (but you still pay taxes on 1040, if in US)
2) Can be distribution
3) Can be W-2 income for you
4) Can be expensed if reinvested into long-term assets or equity assets.