What the tax law regarding paying yourself with already taxed money?

[sethmachine]

To illustrate this question, here is a hypothetical situation:

I. Person A receives X amount of dollars in direct deposit from Corporation C, where they work full time.
The amount already has all taxes and such removed--so taxes and social security have already been paid.
Person A has no tax obligations (and in fact the government probably owes them a tax return).

II. Person A is the sole proprietor of their own company, called MyCompany.

III. Person A funds their own company account by using their personal savings, for which tax has already been paid (it came from their work at Corporation C).

IV. Person A sets up a direct deposit from MyCompany to one of their personal accounts.

My question is, does Person A or their company, MyCompany, have to pay/withhold any taxes for that direct deposit outlined in section IV?

[cooliemae]

I would presume to say that the answer depends on what the transfer from Mycompany to Person A is for. If Person A is 'loaning' the money to Mycompany and the transfer is a payment on loan. However if the transfer is money paid to Person A for work performed (i.e. salary/paycheck) then it would be taxed.

However this is just a thought.

[Petunia 100]

Depends on if MyCompany is generating a net income or a net loss.

If there is net income, then both self-employment tax and income tax are owed on that net income. This will reduce the person's tax refund or result in an amount due.

Edit: Since MyCompany is a sole proprietorship, the income and expenses are reported on Schedule C, an attachment to Form 1040. MyCompany does not file it's own separate tax return.

[sethmachine]

Depends on if MyCompany is generating a net income or a net loss.

If there is net income, then both self-employment tax and income tax are owed on that net income. This will reduce the person's tax refund or result in an amount due.

Edit: Since MyCompany is a sole proprietorship, the income and expenses are reported on Schedule C, an attachment to Form 1040. MyCompany does not file it's own separate tax return.

Thank you Petunia.

So, if MyCompany has no net income except the money I deposit into its account, then there's no taxes to be paid at all?

[Petunia 100]

Thank you Petunia.

So, if MyCompany has no net income except the money I deposit into its account, then there's no taxes to be paid at all?

That is correct. Also, the money you put in yourself is a capital contribution, not income. Income is sales, rents, etc.