06/20/2026
Paying yourself is NOT a business expense.
If you are a sole proprietor or single-member LLC, you do not take a standard W-2 salary. Instead, you move money from your business account to your personal account. In accounting, this is called an Owner's Draw. Here’s what you need to know about it: It is not a business expense. It does not lower your taxable income.
The IRS taxes you on the net profit your business makes, regardless of how much money you actually transfer out to your personal bank account.
Why this matters mid-year:
If you have been categorizing your personal transfers as Payroll or Contract Labor expenses in QuickBooks, your books are artificially low. You might be facing a much higher tax bill than you think.
Let's review your mid-year transactions and make sure your draws are separated from your true expenses.
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