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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13344
Experience:  15years with H & R Block. Divisional leader, Instructor
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Own a small business. Filed extension. Had to put $100,000

Customer Question

Own a small business. Filed extension for 2014. Had to put $100,000 into business of my own money.
How do I show this on my taxes? Thank you for your help.
Dennis lapham. ***@******.***
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Hello,

If this is a small business that is not an S corp or a C corp, you will be filing a Schedule C. On the Schedule C you will show all your income and all the expenses.

The Net will then flow to your 1040. If you have a loss that too will be shown but you would not report the $100k on the Schedule C as an investment in the business. Just all the expenses that the $100k went to pay for would be listed.

I based my answer on this not being an S corp or a C corp so tell me if either of those reflects your business structure.

If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.

Customer: replied 1 year ago.
How do I differentiate the $100,000 from the sales deposit on the schedule c. The 100,000 must somehow be recognized on its own and not part of deposits of customers payments. Please advise.
Expert:  Jax Tax replied 1 year ago.

That is where you are mistaken. The $100000 is not included on the return at all. When filing on schedule C, your business is considered disregarded for tax purposes. This means there is no legal separation between you and the business. So Basically you gave yourself $100 k which has no tax effect and reporting requirement.

What goes on your Sch C is the business income and the business expenses. Money that you transfer from one bank account to another is neither of these.

Expert:  Robin D. replied 1 year ago.

Hello

Sorry for delay in responding. I was not alerted that you had come back until this morning.

The amounts you paid for expenses of the business are not shown as income to the company.

You list the payments to the company from customers on the Schedule C as Gross but the expenses (even if paid by you from personal funds) are shown and subtracted.

You will be allowed to claim those expenses (paid from all sources of funding) and this may mean that you will have a loss on your bot***** *****ne.

In showing the loss you can deduct that from other income on the 1040. That will allow you to recoup the money you supplied yourself.

You are not going to show that $100k on the Schedule C as income at all. About the only place you will be listing this $100k would be on a bank statement but no where for tax reporting except to show expenses paid with it.

The profit or loss from this business flows back to you on the 1040, so all the money is yours actually anyway and no need to account for the amount you contributed (just the expenses that you paid for using those funds).

FREE EXTRA INFORMATION FOR YOU

A common accounting mistake small businesses make is not recording the source of checks deposited.

This is especially problematic if you're contributing the funds from your own money, because at the end of the year it may be difficult for you to determine which deposits were payments received for services, and which were from other sources (like your own pockets). Of course, you could sort this out by going through your personal accounts and records, but analyzing each deposit is time consuming.

To avoid this problem, simply write in your checkbook the source of each deposit, recording the payer and check number for each check. This will help keep your records straight at year end. If some deposits contain too many checks to notate separately in you check book, you'll have to write down the details on a separate piece of paper and record it along with your other checking account records.

Let me know if you need more information or additional help with that Schedule C or rating in a positive way is acceptable.

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