Do I have to pay taxes for 1099 and W-2 at the same time?

Anonymous · ‎January 02, 2019

1) I have a business setup as Doing Business As

2) I only have 1 checking account which is a business checking account.

3) Due to number (2) I have ended up using my business debit card for personal spending.

4) I have also withdrawn cash for personal use

How do I categorize personal spending items so they don't show up as expenses for the business because they aren't?

Do I have to file my taxes a a 1099 contractor or file a W-2 because I took "pay" when I withdrew some cash?

If I transferred some money to a sibblings for nonpayment options..how do I categorize those?

Pete_Mc · ‎January 02, 2019

What type of business? S-Corp or LLC? Something else?

Some (maybe a lot) of the items your accountant may see as actually business related. So be sure to point everything out to him/her.

If it is a S-Corp or LLC, generally any time you take money out of the company it is either an Owner (or Member) Draw or possibly as a Salary. But as the owner you can always take money out of the company as you see fit.

If there really are no legitimate business expenses, put the all in Owners Draw or what ever your company has set up that is equivalent (it should be an Equity Account). Even your Credit Card purchase can be assigned to this account.

One caveat might be if you have put money into the business as a Loan (Loan from Principal). Most tax entities will want you to draw down from that account before the Owner's Draw. So again, Accountant question, but if they had you set up an additional money put into the company after it was formed, this is the account you'd probably draw down any personal items from first.

Also, are any of the family members you gave money to owners of the company? If so, then their money would be taken out in their name in the above manor. But if you're just giving this money to them, then it would all go under your name. Again, if the money is there, you can take it out any way you want.

If the money was a loan, then you may or may not want to set it up as a loan from the company. If there are multiple family "owners" then you may want to set it up as a loan from the company so down the road there are no family issues. But if there is a chance you may sell the company before the loan is paid off OR maybe you don't care if it's paid off, then you may not want the loan to be part of the company. If it is just you giving/gifting money to a family member then you don't have to worry if someday they give/gift money (back) to you.

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Pete_Mc · ‎January 02, 2019

What type of business? S-Corp or LLC? Something else?

Some (maybe a lot) of the items your accountant may see as actually business related. So be sure to point everything out to him/her.

If it is a S-Corp or LLC, generally any time you take money out of the company it is either an Owner (or Member) Draw or possibly as a Salary. But as the owner you can always take money out of the company as you see fit.

If there really are no legitimate business expenses, put the all in Owners Draw or what ever your company has set up that is equivalent (it should be an Equity Account). Even your Credit Card purchase can be assigned to this account.

One caveat might be if you have put money into the business as a Loan (Loan from Principal). Most tax entities will want you to draw down from that account before the Owner's Draw. So again, Accountant question, but if they had you set up an additional money put into the company after it was formed, this is the account you'd probably draw down any personal items from first.

Also, are any of the family members you gave money to owners of the company? If so, then their money would be taken out in their name in the above manor. But if you're just giving this money to them, then it would all go under your name. Again, if the money is there, you can take it out any way you want.

If the money was a loan, then you may or may not want to set it up as a loan from the company. If there are multiple family "owners" then you may want to set it up as a loan from the company so down the road there are no family issues. But if there is a chance you may sell the company before the loan is paid off OR maybe you don't care if it's paid off, then you may not want the loan to be part of the company. If it is just you giving/gifting money to a family member then you don't have to worry if someday they give/gift money (back) to you.

Rustler · ‎January 02, 2019

For a company taxed as a sole proprietor (schedule C) or partnership (form 1065), I recommend you have the following for owner/partner equity accounts (one set for each partner if a partnership)
[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

any money you take from the business is an equity draw, it is not a business expense, and personal expenses are not tracked in a business accounting file. Use Mint or Quicken for personal finance

you only get a w-2 if you are hired by a company, you do not get a w-2 as the owner or partner of a company taxed as a sole proprietor or partnership.

you only get a 1099 if you work as a contractor/consultant for another company and they pay you.

otherwise you conduct business recording income and expense, and the net is your taxable business income.

Anonymous · ‎January 02, 2019

@Pete_Mc

Thanks for answering my question.

My business is not S Corp or LLC just my name DBA Ex.>> "John DBA Johns Carpentry"

I might put all of them in the owners draw as you suggested.

The ones that are expenses, I have the receipt for those.

As for the money I transferred it could be classified as just gifted.

Also I'm the only owner so it's fairly simple.

It was stuff like ..let me get a 20 or 25 dollars etc. A max of 6 times throughout the year.

Although I would still like to know in which category those would go into.

Anonymous · ‎January 02, 2019

@Pete_Mc

The business setup is is just

My name DBA

with a business checking with the same profile

The real business expenses can be clearly identified with receipts etc.

I may have to put them in owners draw as you suggested

I'm the sole owner so gifting them the money seems the best way to go

It was stuff like ..let me get a 20 or 25 etc. Nothing to big. Only 6 times throughout the year.

They were transfers so you could see who and where it went.

I'm still confused though as to which category they go in.

Anonymous · ‎January 02, 2019

@Rustler

Yes I set it up as my name dba so it is sole proprietor.

I have Quickens and I guess it would go under owners pay and personal expenses under equity

So I guess from there I generate the profit and loss and hand it to my cpa

Thanks again

Pete_Mc · ‎January 03, 2019

Since you're using QB), you can give your CPA access and you can have a quick call to make sure everything is categorized correctly.

For Categorizing, as Rustler more specifically pointed out, anything you really think is not business related, use the Equity/Owner Draw. You also should have an Account called Ask My Accountant which you can stick everything in until you talk to your CPA (probably at the bottom of the Chart of Accounts). They can then easily reclassify to where they think it works best for your company.

Pulling out cash is very common. And if it's just money for you, then a Draw. I also have a Cash Account where I show all Cash taken out of Checking. In there I put all sorts of things I'm doing while on an event. Vast majority are business related and have the correct category assigned, some are not but I was working when I spent them and then there is the ever famous "Cash Expense" that I put in when I realize I need more cash and QBs says I still have money. You can categorize this as Miscellaneous (which I hate to use) or talk to your Accountant on a name for an account to create. They'll then know that this is the catch-all for the cash you spent (the extra you tossed in the tip jar or whatever) that you can't account for. My accountant figures a percentage is real and the rest is not a real business expense.

A business can spend money on anything it wants. It just may not be able to consider all of them as business expenses. So to figure out what gets washed out is where the Accountants come in.

On the gifting, just to be clear, you'll take money out of your company (biz checking to personal checking) then you gift the money. Just keeps things a lot cleaning since it's a personal gift from you and it keeps their names out of the biz records on the off chance you're ever audited. (Another question for the CPA, but don't see any reason not to put your name in everywhere in 2018 and then just put some initials in the Memo field to remind you to whom the money went to.)

And for my own curiosity, one final question on the DBA. You said your business is set up: My name DBA

So is the business Some-Company-Name, Inc, DBA young p? Or is your Tax ID just set up as young p, Inc? If your S-Corp or LLC is set up with your name, then there's no DBA - unless you want one and have set it up that way.

Anonymous · ‎January 03, 2019

@Pete_Mc Thanks for the detailed answer

This year it's going to be more organized and planned out to avoid future complications.

My checks just say

Example...

Young P

DBA

MRYP. <<<business name

My CPA set it up that way

Thanks again guys. What a great and helpful community

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Do I have to pay taxes for 1099 and W-2 at the same time?