Taxes and a profit & loss statement

Your federal income taxes are not generally deductible (although some states may allow a deduction on the state income tax return).

Your state income taxes are deductible on your personal Schedule A, assuming you are a sole proprietor.

Other types of taxes (such as payroll tax, sales tax, property tax) that are attributable to your business would go on your Schedule C under "taxes and licenses".

-Mark Bole

If you're preparing this for your own use put it where it makes sense to you. If you're doing it to submit to someone, ask them. I'm too many years removed from Accounting 101 to remember the "right" way to do a P&L, but it really doesn't seem important to me.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

I don't have a paystub. I need the this P&L slash income statement not for myself. There are others such as mortgage and creditors asking for it since I am a contractor. I know I'm gonna have to pay taxes for the year so I was curious where should I place it. Because on a normal paystub it will show the deductibles if I was working for a company.

They don't know where to place TAXES on the P&L or at least are not telling me. They asked me to go to the internet to find examples.

fyi--- I'm curious for myself at this point. I was unemployed for a very long time. I have been dependant on companies to take the deductions. Now, I'm on my own. I need to know what I will be paying for taxes so I don't be surprised on April 14th or April 15th.

Any help will be greatly appreciated...

In my initial reply, I mis-read your request and answered as if you were asking about Schedule C, not a generic P&L. However, you could do worse than to model your P&L after Schedule C, using similar titles for expense lines.

Now you are also asking, how to not be surprised come April when your tax return is filed. You should probably consult a professional, since this is your first year in business for yourself.

-Mark Bole

I don't usually post "me too" comments, but had I known the back story before my initial response I would have said exactly what Mark says. It's crazy to start a business, and that's really what you're doing, without a session with a good accountant. It will more than pay for itself over time. You have much more important issues to address than how to format a P&L.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

You need to get with an accountant NOW, for several reasons.

First - most lenders, especially once they realize you're self employed, are going to want a confirmation letter from your accountant. They will almost never take YOUR word for your income.

Second - the question you asked is NOT the question you need an answer to. Its a bit too convoluted to go into here, but where and how you "book" taxes depends on how you report the income and pay the tax. If you report on a Schedule C, as part of your personal income tax return, or you're operating a Pass-Through Entity, like a business trust, S corporation, partnership or LLC, you do NOT report any income tax as part of the business operation. This is because the income tax is not assessed at the entity level, it gets assessed at the individual level and the amount of tax due is based on your aggregated income, not just your business income.

Third - there are many (MANY) variations of what an income statement should look like. Much of it is driven by the your industry, income levels, and the method of accounting you use. And your accounting method is driven to some degree by your industry and income levels. So without knowing a lot more about what you do you're not going to get a good answer here.

I would encourage you to meet with a local tax accountant to discuss your situation. If you're really a small contractor and use a Schedule C to report your business operations, you can likely simply give the lender a copy of your tax returns - it is highly likely they are going to ask for them anyway.

Good luck, Gene E. Utterback, EA, RFC, ABA