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If I am a sole proprietor is it better for me to be in

payroll? Or do an owners...
If I am a sole proprietor is it better for me to be in payroll? Or do an owners draw - owner equity?
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Answered in 2 minutes by:
3/26/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,768
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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As a sole proprietor the income and deductions will flow through to your personal return.

Therefore, you would not pay yourself via a payroll deduction.

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As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly.

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves

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Below is a link to IRS.Gov with more information concerning taxation of a sole proprietor. ---Paying yourself via payroll is not an option for self employed individuals.

https://www.irs.gov/individuals/tax-trails-self-employment-income-2

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,768
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
Chad EA, CDFA®, CFP® and 87 other Tax Specialists are ready to help you
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Thank you for the rating.

Please do let me know if you have any additional questions.

The owner draw is for your accounting records. From a pure tax stand point you are able to access and use your funds at any time.

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Customer reply replied 4 months ago
Ok so basically it’s my pay except I pay taxes at the end of the year but can make estimated payments quarterly so it’s not too much to pay all at once?

Exactly.

All the income is yours and you will be taxed on the net profit after you deduct your business expenses. For self employed individuals the IRS does not accept W2 pay statements from the self employed.

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Customer reply replied 4 months ago
Ok perfect
Customer reply replied 4 months ago
Thank you!
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