2 Checking Accounts / Deposit, Subtraction or Both

Reese Shellman

I've hit a mental blockage.
Customers pay against invoices using auto-deposit into checking account #1. From that checking account #I I transfer funds and place them into a account #2. How do I categorize these movements?; The payment into the acct #1as a deposit then the withdrawal from acct #1 as a payment. That withdrawal as a deposit into #2?

Please & thank you.

volvogirl

Forget about Owner Draw.  You don't have to account for it.  It's just a transfer from your right pocket to the left pocket.  

Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income.  If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.  

So it's all yours personally.  You can take income out of any account and pay expenses out of any account.  

volvogirl

If you want to track it you could make the payment from bank A to a category (or Account) called Owner Draw.  Then make the deposit in bank B to the same category.  But that will just wash out or net the Owner Draw category.  I guess you could make the deposit in bank B to other category, but what?  

Oh, how are you entering the invoice payment as income?  That need to figure in there somewhere.  The Owner Draw is not the income.  That's you just taking money or moving it to another account.   What you take out is NOT the income.   Your income is the Net Profit or Loss after expenses.  

The original payment deposit should go to the business income category.  By the way, in Quicken, for an income or expense category to show up under Business you have to assign it a Schedule C tax line number. Go into Edit Category and assign it one.   If you need to see a schedule C, here's the blank form….

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

volvogirl

When you make a transfer you enter the account #2 in for the category.  You enter it with square brackets to indicate it is a Transfer.  Like  [Account #2].  Then it will show up in the other account.  You don't have to make the entry in the other account.  

Reese Shellman

Thanks for the quick response. OK, when it shows up in account #2 it will be a deposit (?) which I use as an "Owner's Draw" (My income as I'm a sole proprietor). Does this sound correct?

Reese Shellman

Maybe the following will help to clarify what I am asking.
1. I dissolved a corporation for 2021 and now operate as sole proprietor..
2. An invoice is direct deposited into bank A
3. BUT a transfer from bank A register (payment) automatically shows up in bank B register (deposit) as a transfer and I am unable to categorize the entry bank B register as a category I would like to categorize as call "owner's draw.
5. The only ways I can think of is to refer this transaction as a EFT from bank A and in bank B as a "owner's draw".
Does this make any sense and if not what am I missing?
Many thanks in advance for any advice.

volvogirl

Forget about Owner Draw.  You don't have to account for it.  It's just a transfer from your right pocket to the left pocket.  

Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income.  If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.  

So it's all yours personally.  You can take income out of any account and pay expenses out of any account.  

Reese Shellman

A thousand thanks! Your have cleared my fog of confusion!

volvogirl

If you want to track it you could make the payment from bank A to a category (or Account) called Owner Draw.  Then make the deposit in bank B to the same category.  But that will just wash out or net the Owner Draw category.  I guess you could make the deposit in bank B to other category, but what?  

Oh, how are you entering the invoice payment as income?  That need to figure in there somewhere.  The Owner Draw is not the income.  That's you just taking money or moving it to another account.   What you take out is NOT the income.   Your income is the Net Profit or Loss after expenses.  

The original payment deposit should go to the business income category.  By the way, in Quicken, for an income or expense category to show up under Business you have to assign it a Schedule C tax line number. Go into Edit Category and assign it one.   If you need to see a schedule C, here's the blank form….

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf