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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I have a one person LLC in Massachusetts. Personally, I file

Customer Question

I have a one person LLC in Massachusetts. Personally, I file a schedule C and put my 401K deposit for the year on my personal tax return.

What entry should I be putting in Quickbooks to account for this? Or, since it is going through my personal tax return, do I need an entry on my books at all?
Submitted: 7 years ago.
Category: Tax
Expert:  RD replied 7 years ago.

If you are maintaining the books and would like to record this than you will record a AJE for the 401K amount (based on your Sch C income.)

 

Entry will be

 

401K Contribution(Expense Acct) Dr

401K Payable(Current liability Acct) Cr - since you will pay the amount in this year.

 

Any money you take out of the LLC can be recorded as Owners Draw. It is a good idea to record these in the LLC so that you know your accumulated earnings and your business profitability.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

RD and 5 other Tax Specialists are ready to help you
Customer: replied 7 years ago.
If the contribution is debited to expense, then when I post my Schedule C income, it will be the amount after the 401k deduction. Should I add that amount back in and then deduct the amount elsewhere on my return?
Expert:  RD replied 7 years ago.

Yes, you will not report the 401K expense from the LLC's P&L on Sch C. But you will report this as an adjustment on Form 1040(Page 1)

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.