Sole proprietor issuing a 1099 to him self

[myshemnow]

A Client has a business but the business has a loss so his return will show no income.

but this client took out a withdrawal from his business for his living expenses.

Can he issue himself a 1099 so will he will have at least some income to get some child tax credit?

[IRonMaN]

Even if he could, the 1099 would just increase the loss so you would be back to where you started.

[Just-Lisa-Now-]

No.   Where did the money come from that he took out of the business if it ran a loss? 

Did he put some of his own money into the business to keep him afloat that he ended up pulling back out, or did he get some kind of a loan or grant that he was able to take some money out for himself?  Or did he have some additional income that he failed to report that allowed him to take some money for himself?

Did you take bonus or 179 on an asset that you may want to NOT take so he can show a profit?

[ljr]

All it is is an owner draw - there is no 1099 to a sole proprietor. I'm also assuming the loss is from depreciation or section 179. Do they show a loss because of this distribution? Was it shown as "payroll" or "independent contractor"? and should be taken out of the loss?

[ckevin]

Single return or married filing joint? 

Is the business an S-corp? Sch. C? Partnership?

Does the withdrawal create a basis issue?

First thing is to check your deductions. Remove Sec. 179 or add'l deprec. deductions.

Elect different depreciation method to reduce regular depreciation.

Anything expensed that could be capitalized and depreciated?

Are there any questionable expenses? Be very strict with them.

If a Sch. C then a 1099 won't help even if it was allowed. Won't even go in to whether allowed.

If an S-corp a 1099 could help. Supposed to be payroll but payroll likely not required if no net income. A 1099 for some reason? 

If a partnership then no 1099. Guaranteed payment to partner. That would reduce net income by the partnership % of ownership and go in to income at 100% of the guaranteed payment.

Main take away, yes, the EIC and/or CTC would be nice. But don't do anything wrong, don't cross a line to generate a refund. It's not good for you or the client.

[qbteachmt]

"Was it shown as "payroll" or "independent contractor"? and should be taken out of the loss?"

Exactly. Either of these creates expense, which doesn't apply to a sole proprietor working their own business. The taking of his own business funds is never expense. It doesn't matter if you call it Payroll expense or Subcontractor expense, because neither is true. It's not Expense. And you are not a cost to your own Sched C entity.

"If an S-corp a 1099 could help."

Nope. If you are working for the corporation doing the work of your corporation, that is payroll and that is when reasonable wages come into play. You don't get a 1099-NEC from your own S Corp unless you have another business that did that service to the S Corp. You don't issue yourself a 1099 for the corporation you own and did the work of that corporation. It won't "help."

"Does the withdrawal create a basis issue?"

Taking money from a Sole Proprietorship is not a taxable event. Even if the money became available from the proceeds of a loan, that is not a taxable event. The point to consider is the person and the business are treated as one and the same. That's why it is referred to as a Disregarded Entity. It's not got a Balance Sheet like a corporation. And if that is a loan, there is no separation between business and self for that liability. A corporation can get a loan or lend to a shareholder or employee. A sole proprietor cannot lend to themselves or borrow from themselves; there is no separation of these activities.