Finance Questions? Ask a Financial Expert for Answers ASAP
Hello and welcome. Thanks for your question, and thanks for asking for me.
No problem. You have always been so patient and helpful :)
I'm glad to have you back.
This is a tax expense, so you wouldn't have to track it in Xero
You could just input it into your tax return
I see, but if I need audited financial statements, would the CPA go off my Schedule C?
They will go against your books, and for GAAP you don't deduct mileage. It's a tax deduction
Okay, so the only thing I would enter into Xero are what I invoice my client. My expenses are all down on a business credit card. So I would enter bills charged to the credit card > then payment for the business credit card?
Yes, that is correct.
Then of course, my owner's withdrawal to pay myself and that is income I would be taxed on?
Your owner withdrawal will not be tax. Only net income is taxed.
Am I taxed for any income that stays in the business account?
Net Income = Gross minus Expenses (including mileage)?
Yes, you are taxed on the income your business generates even if you keep it in the bank account
yes, that would be correct
Hmm...maybe I'm doing the accounting wrong. I keep 35% of my gross income in the bank account. I estimated 20% is paid to IRS and the state for self-employment/withholding.
So the remaining 15% I am taxed on unless I withdraw?
No, you're taxed on all your net income.
Oh so what is on Schedule C, then?
the net is taxed at the 20% (or estimated)
Yes, that is correct
And if I overpay, do I get that back on my personal return since Schedule C is on my personal?
Yes, you would get a refund of any tax you overpaid
Got it. Okay, thanks again for all of your help. And sorry for all of the questions!
No do not apologize for your questions. That's what I'm here for