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I started my own LLC in 2008 and borrowed $11,000 for personal…

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I started my own LLC...
I started my own LLC in 2008 and borrowed $11,000 for personal expenses - i told my accountant to classify it as a loan because I had every intention of paying it back when the business (a restaurant) would turn around. I didn't take anything in 2009 and tried to scrape it together for 2010. Needless to say it's not going to happen, and now I'm trying to claim that as income so I can receive unemployment when my restaurant closes this month or next month. Can that "loan" be classified as income or can I have them change that?
Submitted: 8 years ago.Category: Tax
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Answered in 50 minutes by:
6/23/2010
Tax Professional: jgordosea, Enrolled Agent replied 8 years ago
jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
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Greetings,

 

Have you filed any employment tax returns for 2010?

 

Do you have to file payroll returns for 2nd quarter 2010 (April-June) due by July 31?

 

Did you include any pay for yourself in 2010 yet?

 

Have you provided at least $11,000 of service to the company in 2010 for which you were not paid a wage?

 

That information will help us to give a better answer.

Thank you.

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Customer reply replied 8 years ago
Hey John -

No I have not filed any employment tax returns for 2010 yet (we are an LLC, but we are taxed as an S-corp)

No I do not have to file payroll returns for 2nd Quarter (our Employment Leasing company handles all of that).

No I have not included myself in any pay in 2010.

Yes I have provided at least $11,000 of service to the company in 2010.
Tax Professional: jgordosea, Enrolled Agent replied 8 years ago

Hello again,

 

If the facts were that you borrowed the 11K in 2008 it is not proper to report anything contrary to the facts. So, you do currently have 11K due to the company.

 

Since you have performed at least 11K of service for the company this year the company should pay you a wage of 11K.

Instead of taking the 11K from cash to pay you for your work this year it will be taken and used to pay back your loan on the books. (You could cut an actual paycheck and redeposit it to the company to pay the loan; but that is sort of a waste of paper and effort.)

 

So, for the second quarter of 2010 you should report the 11K of wages for you and pay the employment taxes on that amount on your employment tax returns. In fact, you may need to adjust the pay up a bit to allow for the FICA and Medicare that has to be withheld from your pay so that the net paycheck to you is equal to the loan balance that you currently owe the company (perhaps including the interest due).

 

This may require some coordination with the Employment Leasing company to get the correct reporting for the second quarter even though you likely will not be depositing the 11K in the payroll account with that company as you do with the rest of the pay.

 

This will require the company to remit cash equal to 15.3% of the gross check on the employment returns for the total FICA and Medicare that is due on your pay .

 

In this manner you will be paid for your work in 2010 and the loan that you owe will be paid back to the company.

 

Please ask if you need clarification.

Thank you.

 

 

 

 

 

 

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