23 Oct Self-Employed Business Income
- Self-Employed Business Income
- Brennan, S. J. (2018). Tax cuts and jobs act’s effect on personal income tax. Pennsylvania CPA Journal, April, 4–8.
- Cruz, A., Deschamps, M., Niswander, F., Prendergast, D., & Schisler, D. (2019). Fundamentals of taxation 2019 (12th ed.). New York, NY: McGraw-Hill. Available in the courseroom via the VitalSouce Bookshelf link.
- Chapter 6: Self-Employed Business Income
- Form 1040: Schedule C Self-Employed Business Income.
- Mirsky, D. B. (2019). Examining the 2017–2018 tax law changes. CPA Journal, 89(1), 6-9.
- Mishkin, S., O’brien, E., Salisbury, I., & White, M. C. (2019). Tax guide 2019. Money, 48(2), 42–5.
- SHOW LESSInternal Revenue Service
IRS.gov is the homepage for the federal IRS Web site. The Interactive Tax Assistant and Tax Trails are tools that walk you through a series of questions to find answers to tax questions. Download the appropriate forms and publications from the IRS Web site to complete this assessment. - IRS.gov. (n.d.). Retrieved from http://www.irs.gov/
- IRS. (n.d.). Interactive tax assistant. Retrieved from http://www.irs.gov/uac/Interactive-Tax-Assistant-(ITA)-1
- IRS. (n.d.). IRS videos. https://www.youtube.com/user/irsvideos.
- The IRS has a channel on YouTube devoted to income tax information in a video format. There are numerous videos available to help you with the course assessments. Videos are available with closed captions and in ASL and multilingual versions. You can search this channel by topic.
- Deductions
- Herman, T. (2014, February 16). Home-office deduction simplified. The Wall Street Journal, p. 2.
- Intuit Inc. (2015, January 26). Intuit’s QuickBooks Online Self-Employed integrates with Stripe, simplifying tax reporting for on-demand economy workers [Press release]. Business Wire.
- Flynn, K. E., Belak, P., & Soltis, G. (2014). Understanding individual tax compliance: Advanced deductions and related issues. Journal of Business Case Studies, 10(4), 425–440.
- Everett, J. O., Hennig, C. J., Raabe, W. A., & Sonnier, B. M. (2013). Tax planning opportunities for individual net operating losses. Journal of Taxation, 119(3), 108–116.
- Korb, P. J., & Williams, J. L. (2014). Simplified option versus regular method for home office deductions. The CPA Journal, 84(12), 36–39.
- Asssessment InstructionsNote: The assessments in this course are presented in a sequence and must be completed in order. In Assessments 2–5, you will work step-by-step toward completing a 1040 tax return and all the necessary related forms, based on a provided scenario. Do not complete Assessment 2 until you have submitted and received faculty feedback for Assessment 1.
Preparation
Calculating correct entries for self-employment requires significant research. For those are who self-employed, entries from self-employment tax forms are necessary to complete the 1040 form.
For this assessment, use information and publications from IRS.gov and the other IRS resources linked in the Resources under the Required Resources heading to research the regulations and complete the appropriate self-employment schedules, based on the provided scenario.
Scenario
Jacob Weaver is a contractor operating as a sole proprietorship (EIN 12-3456789). 2018 Gross income: $278,322.25.- Business expenses:
- Fuel for equipment $64,080.00
- Repairs and maintenance $17,342.00
- Lubricants for Equipment $9,670.00
- Insurance $6,500.00
- Wages $6,300.00
- Vehicles $1,768.00
- Legal and Professional Expenses $1,750.00
- Taxes and Licenses $1,412.00
- Advertising $300.00
- Clients owe him a total of $53,000, for work completed in 2018.
- 2018 estimated tax payments were $25,000.
- He is using a bedroom in his house as a home office. (Square footage of home 5,600 Office 240 sq. ft.)
- He has one half-time employee, Martin, who had been unemployed since returning from Afghanistan and is disabled.
- Martin worked for Jacob for 20 hours a week, for 41 weeks of 2018. He earned $10,500.
- Jacob had to spend $7,350 for disabled access equipment for Martin.
- Instructions
Complete the following: - Read the information provided in the scenario above.
- Download the appropriate forms and publications from IRS.gov to complete this assessment.
- Complete the entries on tax forms required for a sole proprietorship return.
- Analyze official rules and instructions to correctly compute SE tax and SE deduction.
- 1040sc.
- 1040sse.
- Determine whether Jacob’s business is eligible for any tax credits. Is Jacob’s business eligible to use the Work Opportunity Credit and Disabled Access Credit?
- Determine eligible business deductions.
- Interpret official rules and instructions to record correct entries on tax forms.
- Submit the tax forms.
- Business expenses:
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