any accountants out there?

I have a ?
My dh and I took over our business this year. Now we used to do a profit split at the end of the year with our partners and would leave money in the business account for next years jobs. We have been taking draws as we need them from the business account etc... but does it matter whether the money is in the business account at the end of the year or do we need to take whatever profit we made and put it in to our personal account? Can we just leave it in the business account and keep doing what we have been, just taking money as we need it? I mean we have to pay tax on the money no matter what.

Do you have a separate tax ID# for your business or is it your/your spouse's SSN? If it's under your SSN or your DH's, it won't matter where the money is.

However, if you have a separate tax ID# for the business, the income reporting is then separate for business/personal. If you pay yourselves and put the money into a personal account, the company will then have an expense and you (personally) will have to report the income. You'd want to have the income in the lower tax bracket, in that case. So put the money in the business or personal account based on which is a lower tax rate.

Hope that helps.

Deb

Now i just have to figure that part out? My accountant has not been very goodabout getting back to me these days. i am not sure why? maybe I need a new accountant. Thank you for answering that fro me.

It's a bad time for your accountant to not be returning your calls. The doctors I work for will be meeting with our CPA's next week to do a year-end review, which they do every year. I'd be pretty miffed if an accountant wasn't accessible for a bookkeeping milestone like year-end.

Wish I could be more help as far as tax rates, but those vary from state to state and some slide based on taxable income, plus they may differ based on type of corporation, etc.--

Well, keep bugging your accountant - or try another one.

Deb

yea I understand. I am giving her till monday to get back to me. Then i will start pitching a fit! Or better yet let my husband handle it.

I'm afraid the other poster who tried to answer your question gave you inaccurate & incomplete information. Having a separate tax ID# has no bearing on how your profits are taxed.

If you are a partnership for tax-reporting purposes, you will be taxed on your profits whether you distribute them or not. So you & your partners will pay tax on the money you take out of the business as well as cash you choose to leave in for next year's operations. A partnership does not claim any deduction for payments made to partner/owners.

The issue of year-end planning to shift income to lower tax rates does not apply to a partnership either. Your accountant can help you at year-end by checking to see if you have enough tax paid in for the year. You have until Jan 15th to make your final quarterly tax esimate for 2007, so you still have time.

The requirements for having a separate tax ID do separate the individual status from the business status, so it is safe to say that if the business isn't under a separate tax ID, then it won't help tax-wise to pay profits to the owners.

No, having a separate tax ID doesn't mean you automatically will benefit tax-wise from paying profits to the owners. Partnerships and corporations follow some different rules - yes it's important to clarify that, and I didn't mean to mislead by not going into all that detail. I just wanted to keep it simple as to when to start asking questions.

The bottom line is, of course, discuss year-end options with the accountant - before the year is over. Even if the business is a proprietorship or partnership, there might still be some good last-minute business moves to make to help reduce tax liability.

Deb

Thanks ladies. I am preparing a profit and loss statement for my accountant as we speak (or write). See if we need to buy a new computer or something.