crunchymom
Mar 19, 2014, 09:52 AM
We have a small business that is taxed as a partnership (just my man friend and I). This last year was so bad business-wise that we were unable to pay ourselves several times (we salary ourselves). We did, however, make all of our payments on our business loans faithfully because we are honest people and don't want to hurt our credit.
Now, we show $30k in retained earnings that we have no cash for because that money went to our loan principle, which is not an "expense" but simply reduces our liabilities. We now have to pay tax on that as flow-through to our personal taxes because it is "profit". Is there any way I can re-class this "paper profit" or distribute it or "spend" it? We simply don't have $9k to pay to the IRS for tax on money that we didn't actually make.
Now, we show $30k in retained earnings that we have no cash for because that money went to our loan principle, which is not an "expense" but simply reduces our liabilities. We now have to pay tax on that as flow-through to our personal taxes because it is "profit". Is there any way I can re-class this "paper profit" or distribute it or "spend" it? We simply don't have $9k to pay to the IRS for tax on money that we didn't actually make.