Christopher Crosphit Birthdate April 28 1977 Owns And Operat ✓ Solved

Christopher Crosphit Birthdate April 28 1977 Owns And Operates A He

Christopher Crosphit (birthdate April 28, 1977) owns and operates a health club called “Catawba Fitness.” The business is located at 4321 New Cut Road, Spartanburg, SC 29303. The principal business code is 812190. Chris had the following income and expenses from the health club: Income $216,000. Expenses include business insurance $3,600; office supplies $3,300; payroll $98,900; payroll taxes $9,112; travel $2,420; equipment & club maintenance $10,720; cleaning service $8,775; equipment rent $22,820; utilities $13,975; telephone $2,778; rent $32,600; advertising $5,200; special workout clothing and boxing gloves $780; subscription to Biceps Monthly magazine $120; educational seminar on weight training $770; and other expenses $1,830. The business uses the cash method of accounting and has no accounts receivable or inventory held for resale.

Chris also received interest income for the year: $13,000 from Upper Piedmont Savings Bank savings account and $12,075 from Morgan Bank bond portfolio interest. Additionally, he engages in selling rare and antique books online, earning $4,000 in sales with costs totaling $3,500, and incurring $7,600 in travel and other related expenses. Although he has never turned a profit in this activity, he continues to pursue it for personal interest. Chris is a widower for 10 years, filing as head of household with a dependent son, Arnold (born July 1, 2001). Arnold is a high school student, not qualifying for the child tax credit but qualifying for a $500 other dependent credit. They reside at 4323 New Cut Road, next door to the health club. Chris manages the business from a home office that is 171 square feet within a total house area of 1,800 square feet. He pays $20,000 annually in rent and $4,000 in utilities for his residence. His Social Security number is provided. An estimated $500 tax payment was made to the IRS on April 15, 2019. Complete Chris’s 2019 federal tax return using Form 1040, Schedule 1, Schedule 3, Schedule B, Schedule C, and Form 8829; do not complete Form 4562.

Sample Paper For Above instruction

In this comprehensive tax filing scenario, Christopher Crosphit’s 2019 financial information reveals a complex interplay of business income, investment returns, and personal expenses. The goal is to accurately prepare his federal tax return, capturing all income sources, deductions, and credits while adhering to IRS guidelines.

Christopher’s primary source of income stems from his ownership and operation of “Catawba Fitness,” a health club located in Spartanburg, South Carolina. Employing the cash basis accounting method, he reports gross receipts of $216,000. Expenses associated with the health club are detailed and include both variable and fixed costs such as payroll ($98,900), insurance ($3,600), rent ($22,820), and utilities ($13,975). These expenses reduce the taxable income of the business and are reported on Schedule C. Touching on the specifics, the business's rent and utilities are partially attributable to the home office, which warrants the use of the home office deduction as per IRS rules.

The home office deduction is calculated based on the proportion of the space used exclusively for business. With a total house size of 1,800 square feet and an office space of 171 square feet, the office comprises approximately 9.5% of the total residence area. Expenses such as rent ($20,000) and utilities ($4,000) are apportioned accordingly, with only the respective proportions eligible for deduction. In this case, $1,900 (9.5% of $20,000) of the rent and $380 (9.5% of $4,000) of utilities are deductible, consistent with IRS Home Office Deduction rules.

Investment income adds another layer of complexity. The interest income from the savings account and bond portfolio totals $25,075, which is taxable and must be reported on Schedule B. Schedule B requires listing each interest source, ensuring transparency and compliance with IRS guidelines. The interest income increases Chris’s overall taxable income and may affect the calculation of any applicable tax credits or additional taxes.

Chris’s interest in the book-selling activity introduces a business activity in addition to his health club. Despite continuous losses—$4,000 in sales against $3,500 in costs and $7,600 in related expenses—he reports this activity on Schedule C. The net result is a loss of $1,100, which can be used to offset other income, subject to IRS loss deduction limits. Since Chris actively engages in this activity with genuine intent to profit, losses are deductible, further reducing taxable income.

Tax credits are crucial to calculating Chris’s final tax liability. His son Arnold qualifies for a $500 credit as an other dependent. Filing as head of household, Chris is eligible for standard deduction amounts for 2019, adjusted for his filing status. His total income, deductions, and credits guide him to an accurate tax liability, calculated on Form 1040. Additionally, he made a prepayment of $500 and has an estimated tax payment covering the year, which will be credited toward his total tax owed.

Overall, the key to proper tax reporting in this scenario involves meticulous calculation of deductions for the home office, accurate reporting of diverse income sources, and application of appropriate credits. By carefully combining these elements, Chris can comply with IRS regulations and optimize his tax position, illustrating the intricacies faced by small business owners with investment and side activities.

References

• Internal Revenue Service. (2019). Schedule C (Form 1040) Profit or Loss From Business. IRS.
• Internal Revenue Service. (2019). Schedule B (Form 1040) Interest and Ordinary Dividends. IRS.
• Internal Revenue Service. (2019). Publication 587: Business Expenses. IRS.
• Internal Revenue Service. (2019). Publication 946: How to Depreciate Property. IRS.
• Tax Foundation. (2019). The Home Office Deduction. Tax Foundation.
• IRS Publication 334. (2019). Tax Guide for Small Business. IRS.
• Office of the Revenue Commissioners. (2019). Guide to Small Business Expenses. Irish Revenue.
• Journal of Accountancy. (2019). Understanding Business Losses and Deductions. AICPA.
• National Taxpayer Advocate. (2019). Annual Report to Congress. IRS.
• McGraw-Hill Education. (2019). Federal Taxation: Business and Personal. McGraw-Hill.