The records your tax preparer needs for an owner loan

Money moving between a company and an owner can represent a loan, capital contribution, distribution, reimbursement, or another arrangement. Record the actual purpose and supporting agreement. An account labeled shareholder loan does not by itself establish that every transaction in it is debt.

Give the preparer the entity type, ownership information, direction of the funds, dates, currency, and relevant terms. The legal and tax consequences depend on the facts. Avoid using a generic year-end reclassification to make an unexplained owner balance look settled.

Start with the supported opening balance and list new advances, principal repayments, interest, and other adjustments separately. Match each cash movement to the bank and retain the agreement or approval that explains it. Keep amounts owed by the company distinct from amounts owed by the owner.

For an illustrative company loan from an owner, a $20,000 opening principal plus a $5,000 advance less $3,000 principal repayment leaves $22,000 before other principal adjustments. Interest payments should not reduce that principal merely because they were sent in the same bank transfer.

Review personal purchases, reimbursed business expenses, and transfers entered without a purpose. Collect the original receipts and approvals where appropriate. Ask the accountant to classify the transactions based on evidence rather than leaving all owner activity in one net balance.

If terms changed, a loan was forgiven, or an amount was converted to equity, provide the executed documents and effective dates. Related-party and cross-border arrangements can raise additional questions, so identify them early. Do not assume that a cash-neutral change has no reporting effect.

Ask the preparer to explain any proposed adjustment and whether it should be posted to the financial ledger, retained only in tax records, or reviewed with counsel. Keep the approved treatment and supporting calculation with the schedule. The bookkeeper should not have to infer it from a tax-return balance.

Reconcile the final owner-loan schedule to the filed return where applicable and the approved books. Set up the next year's opening balances from that reconciled position. Obtain professional advice before choosing repayment, forgiveness, or distribution treatment solely to achieve a preferred tax result.