In this episode of the Tax and Accounting Ride Along Podcast, we’re breaking down one of the most common—and most misunderstood—topics in small business taxation: how LLCs are taxed. If you own an LLC (or are thinking about forming one), this episode is a must-listen. 🚗🎧

LLCs are incredibly popular because of their flexibility, but that flexibility also creates confusion—especially when it comes to taxes. By default, most LLCs are flow-through entities, meaning the business itself doesn’t pay income tax. Instead, profits and losses flow directly onto the owners’ personal tax returns. This structure helps avoid double taxation, but it also comes with important responsibilities that many business owners overlook.

We’ll walk through how single-member LLCs are treated as disregarded entities, while multi-member LLCs are taxed like partnerships by default. We’ll also explain why the number of members matters and how ownership percentages impact who reports what on their tax return.

A major focus of this episode is self-employment tax—what it is, why LLC members are subject to it, and how it can significantly impact your overall tax bill. Many LLC owners are surprised to learn that even though their business is “pass-through,” they’re still responsible for Social Security and Medicare taxes on their share of the profits. 💸

From there, we dive into LLC tax elections. Did you know an LLC can elect to be taxed as an S corporation or even a C corporation in certain situations? We’ll discuss:

When an S corporation election might help reduce self-employment taxes

Why a C corporation election is rarely used—but sometimes strategic

What business owners should understand before making any election with the IRS

We’ll also touch on the importance of proper recordkeeping, staying compliant as tax laws change, and why trying to “DIY” LLC tax planning can lead to costly mistakes.

Most importantly, this episode reinforces a key truth: LLC taxation is not one-size-fits-all. The right tax structure depends on your income, growth plans, and personal financial situation—which is why professional guidance is so critical.

Whether you’re a new LLC owner, a seasoned entrepreneur, or just trying to better understand how your business is taxed, this episode will give you clarity, context, and practical insight you can actually use.

So buckle up and ride along as we demystify LLC taxation and help you make smarter, more informed decisions for your business. 🚦

In this episode of the Tax and Accounting Ride Along Podcast, we’re breaking down one of the most common — and costly — misunderstandings in small business accounting: owner’s draws and member’s draws are not deductible business expenses. 🚨

If you’re a sole proprietor, single-member LLC owner, or part of a multi-member LLC, chances are you’ve taken money out of your business at some point. But are you treating it correctly for accounting and tax purposes? This episode explains why getting this wrong can lead to IRS issues, inaccurate financials, and unexpected tax bills.

We start by clearly defining what an owner’s draw and a member’s draw are from an accounting standpoint, and how they differ depending on your business structure. Then we tackle the big question: why the IRS does not allow these withdrawals as deductible business expenses — even though they reduce your business’s cash balance.

You’ll learn how the IRS views draws as distributions of profit rather than operating expenses, and what that means for your taxable income. We also explain the tax implications, including why business owners are taxed on profits whether or not they actually withdraw the money. 💡

To wrap things up, we share practical tips to help you stay compliant and avoid common mistakes, such as:

• Keeping accurate records of owner’s and member’s draws
• Avoiding draws that exceed business equity
• Understanding how improper draws can lead to double taxation
• Knowing when it’s time to consult a tax professional

If you want cleaner books, fewer tax surprises, and a better understanding of how money really flows in your business, this episode is a must-listen.

🎧 Buckle up for another clarity-packed episode of the Tax and Accounting Ride Along Podcast, where we turn confusing tax rules into practical knowledge you can actually use.

In this episode of the Tax and Accounting Ride Along Podcast, we’re diving into one of the most powerful—and often misunderstood—tools in tax planning: Net Operating Losses (NOLs). Whether you’re a business owner coming off a tough year or a tax professional advising clients, understanding how NOLs work can make a major difference in managing tax liability and cash flow. 📊

A Net Operating Loss occurs when a business’s allowable deductions exceed its taxable income for the year. While no one enjoys operating at a loss, the tax code offers an important silver lining: those losses don’t have to go to waste. NOLs can be used to offset income in other tax years, creating meaningful Net Operating Loss tax benefits that help businesses recover and stabilize financially.

We’ll start by breaking down the fundamentals—what qualifies as an NOL, who can use them, and how they fit into an overall tax strategy. From there, we’ll explore the two key ways NOLs can be applied: carrybacks and carryforwards.

You’ll learn how NOL carrybacks historically allowed businesses to apply losses to prior profitable years and receive tax refunds—and how the Tax Cuts and Jobs Act (TCJA) dramatically changed those rules. For most businesses, carrybacks were eliminated, shifting the focus entirely to carryforwards. Understanding when exceptions apply is critical, and we’ll explain that clearly and in plain language.

Next, we’ll take a closer look at NOL carryforwards, which now allow losses to be carried forward indefinitely under current law. While that sounds generous, there’s an important limitation many taxpayers overlook: NOLs generally can only offset up to 80% of taxable income in future years. We’ll discuss how that limitation works, why it matters, and how it impacts long-term tax planning. 💡

We’ll also cover practical considerations—such as record-keeping, tracking carryforward amounts, and timing decisions—so you don’t accidentally lose valuable tax benefits. Proper documentation and annual review are essential to staying compliant and maximizing the value of your NOLs.

Finally, we’ll touch on recent insights from trusted tax resources and explain why professional guidance is often necessary when dealing with NOLs. Between changing legislation, special rules for different entities, and strategic planning opportunities, this is an area where informed decisions really pay off.

Net Operating Losses can be a powerful tool when used correctly—but they’re not automatic, and they’re not always simple. Tune in to learn how NOLs really work, how recent law changes affect you, and how to use them strategically to improve cash flow and reduce future tax liabilities.

Buckle up for another informative and practical episode of the Tax and Accounting Ride Along Podcast—designed to help you make smarter tax decisions with confidence. 🎧

#NetOperatingLosses #NOL #NOLTaxBenefits #NOLCarryforward #NOLCarryback #TaxLossStrategies #BusinessTaxPlanning #IRSTaxRules #TaxDeductions #TaxLiabilityReduction #CashFlowTaxPlanning