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Question
I need tax information help?
My boyfriend is a small business owner. I want to know what tax forms he needs to use when its tax time. The Form used already is a 1099 but question is can he and if yes should he also file a 1040 on top of the 1099. They always and only use a 1099 form. This past year their business lost money because it was a growing year and they spent alot of money on materials. My problem is that on his tax forms it only shows him taking a loss. It shows a negative amount of money. What I cant understand is he pays himself every month but that doesnt show in his tax papers.Can that be right? Its like he made no money last year. Was there and is there another way to do the taxes? Oh and he hasnt recieved a stimulus check either? We dont even know what to show when trying to get financed for a house. I know this is alot but if someone could please help me better understand this? Thanks! He has an accountant who does his taxes. What do you mean he was using savings?
2 months ago - 3 answers
Best Answer
Chosen by Asker
Honestly you need to sit down with the accountant if you want to completely understand all of this but I'll try to explain what I can. The form he needs to file depends on how his business has been set up. If he incorporated, he *probably* needs to file an 1120S for the business. From the 1120S comes a K-1 form that shows the business's net income (or loss) that he has to report on his own 1040. If he pays himself wages *and* deducts payroll taxes from them, he should get a W-2 from his business. If he is only taking out money from the company without paying payroll taxes (called draws or distributions), it can be shown on a 1099 that is claimed on Schedule C of his 1040 return (which sounds like your case). If your boyfriend did not incorporate his business, all of the business transactions must be reported on his 1040 via Schedule C (for most business types). It is quite possible for him to show no income. If the business took a big loss (which it sounds like it did), that would be enough to net against whatever he took out of the business for himself and still get a negative amount. If he takes out $2,000 a month ($24,000 a year) but the business lost $44,000 for the year, ultimately it's going to show a $20,000 loss overall. Like I said, this is a bit complicated and should be discussed with the accountant if you want more clarification since s/he is aware of the specifics of your boyfriend's business. If your biggest need is to show some income for a lender, I recommend your boyfriend pay himself actual wages, take out the payroll taxes on them, and get a W-2 at the end of the year.
Source(s)
Accountant
by wingz_25
2 months ago
Asker's Rating: 
Other Answers
It sounds like it would be a very good idea for him to consult a CPA or EA about this. If your question is accurately reporting what he's doing he's already very confused about requirements
by Judy- 2 months ago
If he had negative income, he won't get a stimulus check. He had to have $3300 or more from his self-employment income to qualify. (There will be a second chance worksheet in 2008). He wasn't really paying himself each month--he was using up savings.
by v b- 2 months ago