Taxes Made Simple

A reader asks: I'm doing a business plan for a sole proprietorship. I don't understand if I will be taxed on the salary that I give myself (and then again on the remaining net sales) or if I should only tax myself once.

My answer: Well, if your business is a sole proprietorship, there is no such thing as salary that you pay yourself. In fact, as far as the IRS is concerned, you and your business are indistinguishable from each other. Any sales made by the business will be reported on your Schedule C for the year. (Schedule C is an attachment to your Form 1040.) In other words, the business's income will simply show up on your own personal return.