Income Taxation for Sole Proprietor
How should the sole proprietor's own monthly salary be accounted for on his Schedule C?
Is it deductible anywhere?
Also, if the business's receipts are deposited into a business checking account, should a separate personal bank
account be created in which
to deposit money withdrawn
from the business checking account as the proprietor's own salary? Will this cause problems of double counting in
case of an audit?
1 Answer from Attorneys
Re: Income Taxation for Sole Proprietor
Your monthly "salary" is really a draw against the net income from your business. It is therefore not deductible to your business.
Your business should always maintain a separate account for its business expenses and the check for your draw would then be written against the business account and deposited into your personal account.
As long as the accounts are maintained separately, you should have no problem proving your income in an audit (and not be subject to double taxation).
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