Categorization of Government Taxes

nekton

My company is a single member LLC. I paid my accountant to file my taxes to the state and federal governments. Their bill I categorized as "Accounting Fees".

I owed state a certain amount which was paid out of my bank account associated Wave. Same for my federal payment. I don't see a built in category for these items. Can someone help me what I should use for these two separate payments?

Separately, since the state tax was paid out of the business account, I received a property tax refund to this same account and it has shown up as a Wave transaction. I am a home based business but don't do any deductions of my home for the business. I would like to make this refund be simply pass through to my personal account and would like to know how to categorize it both for the receipt of it from the state government and the transfer of it to my personal account.

Thanks in advance,

Matt

Mikeg

Matt,
The payment of taxes would be categorized as an owners draw. Taxes for a single member LLC are not a deductible expense for the business. The receipt of the refund would be categorized as an owner contribution since it came into the business account. Home based businesses are eligible for home office deductions and I encourage all of my clients to take advantage even if they just take the safe harbor provision.

nekton

Mike,

Thanks for the guidance. When I made the categorization adjustments per your recommendation, my net income on the dashboard looked more like what I expected. Very much appreciated. It will help me in the future as well. I have considered deductions as a home based business for things like my in home lab, office, car and my mobile/business phone.

What made me think there should be a category for state and federal taxes is there is one for sales tax. Not sure why that pass through money has its own category. As an IT services business I have to charge sales tax on anything I install. Repairs are not taxable.

I definitely will consider you for your professional services once I have the revenue where I can pay for such a valuable service.

Matt

Mikeg

Matt,
Best of luck! Hope to hear from you in the future. Although my fees are very reasonable. Rates published at mgfinancial.net.
Sales tax can be presented in 2 different ways. Because your receipts contain sales tax, some businesses will just expense sales tax paid to the state. This effectively zeros out the sales tax included in the deposits. Other businesses will track sales tax as a liability. Meaning when sales are recorded they are split between Sales on the income statement (a credit) and sales tax payable (a credit) the two added together equals the deposit (a debit) to cash. When payments are made they are posted against the liability. Have a great rest of the day!