How to file personal taxes when owining an LLC
My wife started up an LLC Corp S (maybe Corp C, I cant remember exactly)in May 2013. She is the only "employee" of the company. She has a family friend accountant doing her business taxes, but due to his costs and other personal reasons, she decided to do her personal returns herself. I should mention at this time that we do files our taxes separately. Without the major details, how does she and what forms does she need to file for her personal returns? And what would be considered her "income" as opposed to the businesses income.
A little more details now... I know its not suppose to be done this way, but she did use the same checking account for personal and business uses. Every bit of income/deposit made to the account was sourced from the business. I already went through the trouble of categorizing and separating every debit transaction as either business or personal. I already gave her accountant (the family friend) the reports needed for the business end. Those reports consisted of all business income less all categorized business expenses, showing the businesses net profit is of $XX,XXX.00. Those business expenses did NOT include any of her "pay" or other personal expenses. She never physically gave herself a paycheck, but rather just used the account for personal expenses, which I guess can technically be considered as her "pay". I did generate a second report from that account for ourselves showing only all her personal income & expenses, which obviously showed no income because all deposits to the account were ledegimate business income. All of these personal expenses combined totaled roughly the same as the business net profit explained earlier, meaning she basically spent all the businesses net profit on personal items & expenses (or her own "pay").
Now, I can only assume that the total of those personal expenses would be her taxable gross personal income, less a few personal deductions. If I am correct on that assumption, what forms would she need to file? I am assuming a 1099?. Again if I am correct on that assumption, I would also assume that this 1099 would show little to no deductible "business expenses" due to this being her personal income taken from her business.
Assuming I am correct on all of this, it raises a question of being double taxed. If the business is being taxed based on the net profit, and she is being taxed on her gross income, which is essentially from the same source, isn't that double taxing?
Please let me know if my assumptions are correct and advise me differently if I am wrong. Also, what additional forms would she need to fill out in conjunction with the 1099?
Thank you for any help
Last edited by jburatti : 04-08-2014 at 06:40 PM.