Q:

Subject: QB Tips

 

Dear Sir,

Your  QB Tips have been extremely useful.  Thank you!  I do have a question which you haven’t covered directly (I don’t think).

For a business  C-corp, how is business income (say from consulting fees) that is used to pay Stockholder Loans treated?  For example, say the business received $100,000 income and paid  $30,000 of this to Stockholder Loans, how do you show the income reduction, since this is not a taxable event?  I know you record it against the Stockholder Loans account, but since it is not an expense, how does QB let you reduce the $100,000 by the $30,000 on the income/expense reports so that only $70,000 is taxable in this case?

Perhaps  you could cover this in a revision?

Thank you!

A:

Actually, this topic is covered in my tips.  It involves “Loan Activities” and mixing balance sheet entries with income statements.

Basically, payments on loans have no effect on the net income. This is why it’s not a very wise idea to just look at the bank account balance as a reliable indicator of a company’s net income.

There are ways to reduce corporate income by payments to the owners; but those would have to be picked up by the owners as income on their 1040s.

You really should be working with a tax pro to prevent these kinds of misunderstandings that could cause serious problems and work out a strategy to minimize your taxes. 

Good luck.

Kerry Kerstetter

 

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