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Harvey1
Level 1

Proper account for federal tax payments?

My business is an LLC and I file taxes as a Sole Proprietor. What type of account should I use to record my estimated federal income tax payments? 

Right now i have it under an expense account, but I don't like that because it is not a deductible expense and it skews my P&L reports. 

Solved
Best answer December 17, 2018

Best Answers
Rustler
Level 15

Proper account for federal tax payments?

when you pay estimated quarterly income tax payments from the business that is an equity draw, it is not a business expense

 

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

 

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4 Comments
Rustler
Level 15

Proper account for federal tax payments?

when you pay estimated quarterly income tax payments from the business that is an equity draw, it is not a business expense

 

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

 

View solution in original post

Harvey1
Level 1

Proper account for federal tax payments?

Thanks! 

I already have had my equity accounts setup that way. I use my members draw account to pay myself. 

CreativeLedgerLLC
Level 1

Proper account for federal tax payments?

If I wanted to set aside 40% for estimated taxes could I have 4 equity accounts?..

 

Equity

Equity Draw (the money left after 40% has been put into the tax holding account that is available for personal income payments)

Equity tax holding 

Equity investment 

LYR
Level 1

Proper account for federal tax payments?

Hi there...is this the same for California State Taxes to the Franchise Tax Board? They would go under a draw? 

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