Small business LLC tax filing questions - correct inclusion of owner payments on Schedule C

This is a common point of confusion for LLC owners. The way your payments to yourself and your husband would appear on your tax forms depends on how your LLC is taxed. If your LLC is taxed as a sole proprietorship (single-member LLC) or partnership (multi-member LLC), then any money you take from the business is not considered a salary but rather an "owner's draw." These draws don't show up separately on your Schedule C because they're not business expenses - they're essentially you taking your profits. The Schedule C only shows your business income and expenses, with the resulting profit/loss flowing to your personal tax return. If your LLC has elected to be taxed as an S-Corporation, then any salary you pay yourself should appear as a wage expense on your business tax forms, while distributions would not be deductible business expenses. The best way to verify this is to ask your accountant specifically which tax election your LLC is using and then request that they walk you through the forms with you to show exactly where everything is reported.

I was in the same boat last year and spent hours trying to figure out what was going on with my return. I ended up using https://taxr.ai to review my tax documents and it was a game-changer. You upload your tax forms and it actually explains in plain English what each section means and if there are any potential issues. For my LLC, it showed me exactly where my owner compensation was reflected and explained how my business structure affected how payments to myself were treated. Saved me a lot of back-and-forth with my accountant (who charges for every little question). Might be worth checking out if you want to understand your return better.

Just wanted to follow up about https://taxr.ai that was mentioned above. I decided to try it out with my small business tax return from last year as a test, and I'm actually really impressed. It highlighted exactly where my owner compensation was reflected across different forms and explained why some payments were considered draws vs. salary. What I found most helpful was that it flagged that my accountant had classified some of my owner payments in a way that could potentially trigger IRS questions. I was able to ask my accountant about it before filing this year's return and he made the adjustments. Definitely going to use it again for double-checking this year's return.

If you're still confused after talking to your accountant, you might want to call the IRS directly to ask about how owner payments should be reflected on your return. I know it sounds intimidating but they can actually be helpful sometimes. I tried calling them about a similar issue last year and gave up after being on hold for 2+ hours. Then I found this service called https://claimyr.com that actually holds your place in line with the IRS and calls you back when an agent is about to answer. You can see how it works at https://youtu.be/_kiP6q8DX5c - I was skeptical but it saved me from wasting an entire afternoon on hold. The IRS agent I finally spoke with explained exactly how my LLC payments to myself should be reported, which gave me peace of mind that my accountant had done it correctly.

Came back to say I was completely wrong about Claimyr. After being unable to reach the IRS for three days straight about an LLC tax issue similar to the OP's, I reluctantly tried the service. Within 2 hours I got a call back and was connected to an actual IRS agent who helped clarify exactly how my LLC payments to myself needed to be reported. For what it's worth, the agent confirmed that for my single-member LLC (not elected as S-Corp), my owner draws aren't separately reported on Schedule C since they're not considered business expenses. The Schedule C just shows business income minus legitimate business expenses, and the resulting profit flows to my personal return. Any money I take out for personal use doesn't affect that calculation.

I think your accountant should have explained this better. The basic rule is: For a regular LLC (default tax status): - Owner draws aren't business expenses - The whole profit is taxable to you personally whether you took money out or not - Salary to yourself isn't a thing (tax-wise) in this structure For an S-Corp LLC: - Reasonable salary to yourself IS a business expense - Distributions beyond salary aren't business expenses - You pay self-employment tax only on the salary portion Either way, Schedule C (for single-member LLC) or Form 1065 (for partnership LLC) would show your business profit, but money you take out doesn't affect that profit calculation unless you're an S-Corp paying actual W-2 wages.

I'm surprised nobody has asked this yet - but what tax software is your accountant using? Some programs organize the information differently. In Drake Tax software, for example, all the detail about owner payments might be in a supplemental worksheet that doesn't print with the final return unless specifically selected. Ask your accountant for the "full return with all worksheets" rather than just the filing copy. That might show more detail about how your payments were categorized.

Just wanted to add that you should also check if your accountant provided you with a "client organizer" or summary sheet that breaks down how your payments were treated. Many accountants create these internal documents that show the logic behind how owner compensation was handled, even if it doesn't appear explicitly on the tax forms themselves. Also, don't feel bad about not understanding this - the tax treatment of LLC owner payments is genuinely confusing and even some accountants don't explain it clearly. The key thing to remember is that if you're a regular LLC (not S-Corp elected), your "salary" and "draws" are treated the same way for tax purposes - they're just you taking your share of the profits, which you owe tax on whether you take the money out or not. If you're still concerned, you could always get a second opinion from another tax professional. Sometimes a fresh perspective can help clarify things your current accountant might have assumed you understood.