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Income Tax Payment from Business Account

I am looking to pay my income tax out of my business account relating to my Single Member LLC with no employees other than myself.  I was thinking of adding the following in the Chart of Accounts:

 

Account Type:  Equity

Detail Type: Owners Equity

Name:  Owner's Income Tax

Description:  Income Tax relating to LLC

 

I would then create a transaction of type Check with the following:

 

Payee:  State \ Federal Income Tax

Category: Owner's Income Tax

 

Is this a valid way to log this transaction or am I completely way off on how this should be handled?

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Best answer 06-13-2019

Accepted Solutions
Super Contributor **

Re: Income Tax Payment from Business Account

That's exactly how you should do it.

Since income tax is a personal expense, and not a business expense, paying it from the company account is equivalent to a draw, and posting it to the equity section is exactly correct.

It will also help you keep track of the tax payments so you don't overlook them when you prepare your tax return.

Mark Wagner,CPA

3 Comments
Super Contributor **

Re: Income Tax Payment from Business Account

That's exactly how you should do it.

Since income tax is a personal expense, and not a business expense, paying it from the company account is equivalent to a draw, and posting it to the equity section is exactly correct.

It will also help you keep track of the tax payments so you don't overlook them when you prepare your tax return.

Mark Wagner,CPA

Not applicable

Re: Income Tax Payment from Business Account

Thank you Mark, much appreciated.

 

David

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Re: Income Tax Payment from Business Account

Can I set this up as equity - estimated taxes also?

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