Paying myself from my business

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KimE
KimE Member Posts: 1 Newcomer

I have a business. I pay myself a salary each year. Every year I have filed and did this and the salary is reported as my income not business income. FOr the life of me this year I can't figure out where I put that number. It must be age!! But where would I put the money that I pay myself so that it will show up as my income. Last year and the year before wherever I put it it showed up on line 1 which I thought was only w2 income and I know I didn't send myself a w2. Can anyone help please I have racked my brain trying to remember where I put it!!

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  • KristineS
    KristineS FreeTaxUSA Agent Posts: 109
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    Hi KimE,

    The structure of your business matters in how the income you pay yourself is reported. If you're a sole proprietor or Single Member LLC, there is not a separate line to report what you paid yourself. If however you formed and LLC w/ and election to be taxed as S-Corp for instance, you report your salary as wages to yourself, meaning a W-2.

    Salary typically means paying yourself via paycheck with the appropriate amount of social security and medicare tax withheld and sent to the IRS. Payroll tax is sent in monthly to the IRS (or whatever schedule has been set), and filing a Form 941 on a quarterly basis. You would issue a W-2 to yourself. It's like you are your own employee of your business. That doesn't sound like the case.

    If however, you mean by paying yourself a salary you simply took business income out of your business income account and paid yourself on a regular basis with no social security or medicare tax withheld, you simply paid yourself as a self-employed individual. No W-2 is involved. There is no separate reporting requirement or line to report what you paid yourself. All income is subject to self-employment tax and is reported on Schedule C.

    The income you make (not necessarily what you pay yourself) is reported on Schedule C, line 1.

    The path to report self-employment income in our software is INCOME > BUSINESS INCOME > BUSINESS INCOME (Schedule C). There is not a separate line to report what you paid yourself.