Finance & AccountingFree
Owner Draw and Personal Expense Review
Send bank and card activity, and get every line marked business, personal or a question for you, with the personal share priced for your entity type.
River's owner draw review reads every card and bank line and makes three calls rather than two: business, personal, or a question for you. The third bucket is the honest one. Whether a fuel charge was a trip to a job site or the drive to work is not visible in the transaction, and a tool that guesses is quietly writing your tax position for you. Those lines come back as questions with the specific fact each one needs, and none of them get decided in your absence.
Then it prices the personal share, which is the part every competitor stops short of. A two-bucket split ends with a total and the implication that you lost a deduction. What the personal spending actually costs depends on the entity you operate through, and the four common forms produce four different answers. One of them is taxed twice. Getting the transactions into a readable shape first is what bank statement conversion is for.
Written for the owner-operator who knows the answer is messy, and for the bookkeeper who has been asking about it for six months. Card spend with missing receipts is a separate problem handled by card statement matching. If the same invoice went out twice, that is the duplicate payment scan. Where the chart of accounts is the underlying problem, the trial balance normalizer comes first, because a draw account nobody defined is how this starts.
The same personal expense has four different prices
The statute is blunt: no deduction is allowed for personal, living, or family expenses. That much every tool knows. What happens next depends entirely on the entity. For a sole proprietor the personal spending is a disallowed deduction and nothing more, because a draw was never an expense. For an S corporation the same money is a constructive distribution, and anything above the shareholder's stock basis becomes gain from the sale or exchange of property.
A partnership does the same thing through capital accounts, where money distributed above a partner's adjusted basis triggers gain, and the other partners' shares move with it. A C corporation is the worst case, because the expense is nondeductible to the company and a dividend to the owner. Vessey Grading and Excavation ran 61,300 dollars of clearly personal spending through an S corporation against 38,000 of stock basis, so 23,300 of it became capital gain.
A third pile is correctly business and still at risk. Travel, vehicle use and gifts are only deductible where the taxpayer substantiates the amount, the time and place, the business purpose and the business relationship. Of Vessey's 412 such lines, 224 carried no recorded purpose, putting 47,900 at risk for a reason no reclassification fixes. Home utilities are stranger still, since the exception only covers a space used exclusively and regularly for business, so the guest bedroom is not sixty percent deductible.
How it works
Add the activity
Bank and card transactions for whatever period you want reviewed, in any export format.
Name the entity
Sole proprietor, partnership, S corporation or C corporation, plus your basis if you know it.
River sorts and prices
Three buckets, the personal share priced against that entity, and substantiation gaps kept separate.
Answer the questions
One list of specific facts only you know, then the reclass column is ready to post.
What you get
- Three calls per line: business, personal, or a specific question routed back to you
- The personal total priced against your entity type, not just moved to a draw account
- Constructive distributions tested against stock or partnership basis, so the gain is named
- Lines correctly coded business but missing a recorded purpose flagged as their own problem
- Home office lines tested for exclusive use rather than split by a guessed percentage
- A reclass column ready to post, and a question list short enough to actually answer
Common questions
Why three buckets instead of two?
Because the third one is real, and pretending otherwise makes the numbers worse. Fuel, meals, hardware and home internet turn on a fact the transaction does not carry. In the worked ledger 152 lines worth 84,900 dollars needed the owner's answer, and a tool that assigns them silently has decided your tax position without telling you.
Does my entity type really change the answer?
It changes what the personal spending costs, which is the only part you care about. A sole proprietor loses a deduction. A partner or an S corporation shareholder gets a distribution that can exceed basis and turn into gain. A C corporation shareholder gets a dividend on money the company already could not deduct, so the same dollars are taxed twice.
What is stock basis and why does it matter here?
It is the ceiling on how much you can take out of an S corporation tax free. Distributions up to basis are not income, and the excess is treated as gain from the sale or exchange of property. Personal expenses paid by the company count against that ceiling, so a year of them can push you past it without anyone noticing.
Can I just claim a percentage of my home internet?
Not on the home office rule, which is binary rather than proportional. The exception covers a portion of the dwelling used exclusively and regularly for business, so a room that is also a guest bedroom fails outright rather than qualifying in part. Utilities allocable to a space that does qualify are a separate calculation.
Some charges are clearly business. Why are they flagged?
Because classification and substantiation fail independently. Travel, vehicle use and gifts need the amount, the time and place, the business purpose and the business relationship recorded. Of 412 such lines in the worked ledger, 224 had no purpose recorded, so 47,900 dollars was correctly coded and still exposed. Writing the purpose down now is the fix.
What if the owner disagrees with a call?
Then it changes, and the reason is recorded beside it. Every line carries the fact it turned on, so a disagreement is a factual conversation rather than an argument about categories. Lines the owner overrides stay marked as owner-determined, which is what somebody reviewing the file a year later needs to see.
Will this fix prior years too?
It will show you what prior years look like, which is different from fixing them. The output separates what is still open from what has been filed, because amending is a decision with its own cost. Where a notice has already arrived asking about a deduction, the tax notice response is the place to start.
Owner Draw and Personal Expense Review
Fill in the form and your workspace opens with the work already underway.