Self-Employed Business Income Brennan S J 2018 Tax Cuts

Self Employed Business Incomebrennan S J 2018 Tax Cuts And Jobs

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 (6th ed.). New York, NY: McGraw-Hill. Available in the courseroom via the VitalSource 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. Internal 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 IRS. (n.d.). Interactive tax assistant. Retrieved from IRS. (n.d.). IRS videos. 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. Assessment Instructions Note: 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 who are 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). 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 sq. ft., Office 240 sq. ft.). He has one half-time employee, Martin, who had been unemployed since returning from Afghanistan and is disabled. Martin worked 20 hours per 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. 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.

Paper For Above instruction

This paper provides a comprehensive analysis of Jacob Weaver’s 2018 tax scenario, focusing on his status as a self-employed contractor operating as a sole proprietorship. It aims to meticulously prepare and review all necessary tax forms, particularly Schedule C and Schedule SE, to ensure compliance with IRS regulations and optimize tax outcomes. The discussion delineates the steps involved in calculating gross income, deductible expenses, self-employment tax, and potential business credits, integrating current tax laws and IRS guidelines.

Initially, Jacob’s gross income derived from his contracting work amounted to $278,322.25, which is the primary figure for his income statement. From this sum, eligible business expenses must be subtracted to determine net profit. Expenses such as fuel for equipment ($64,080), repairs ($17,342), lubricants ($9,670), insurance ($6,500), wages ($6,300), vehicle expenses ($1,768), legal and professional fees ($1,750), taxes and licenses ($1,412), and advertising ($300) were all incurred in the course of his business operations. Summing these expenses yields a total of $111,422. For accuracy, it is essential to verify whether all expenses qualify fully under IRS rules; for now, we proceed assuming these are accepted deductions.

Furthermore, Jacob’s clients owed him an additional $53,000 at year-end, representing revenue earned but not yet received, which must be included in his gross income per the accrual method unless he reports on cash basis, which typically applies to small sole proprietors. The scenario suggests that cash basis accounting may be appropriate; hence, only received payments or payments for work completed would be included. For simplicity, we assume cash basis, so the accounts receivable may not be added unless explicitly instructed otherwise.

Additionally, Jacob utilized a home office, occupying 240 square feet of a 5,600-square-foot home. According to IRS guidelines, the home office deduction is calculated based on the ratio of the office space to the total home space—specifically, 240/5600, which is approximately 4.29%. This percentage will be applied to allowable expenses related to the home, notably mortgage interest, property taxes, utilities, and depreciation, to determine the home office deduction. Given that detailed mortgage or property tax data is not provided, this aspect could be estimated or omitted if not specified.

For employment considerations, Jacob employed Martin, who worked 20 hours weekly for 41 weeks, earning $10,500. Since Martin is disabled and had been unemployed, special tax credits such as the Work Opportunity Credit (WOC) and Disabled Access Credit (DAC) may be applicable. The WOC offers a tax credit for hiring certain targeted groups, including unemployed veterans, while the DAC provides financial assistance for expenses incurred in providing access modifications for disabled employees.

Regarding the calculation of self-employment tax, Jacob’s net earnings from self-employment are determined by subtracting allowable business deductions from gross income and then applying the IRS-recommended rate and adjustment factors. The Self-Employment tax rate is currently 15.3%, consisting of Social Security (12.4%) and Medicare (2.9%) components. Half of this tax can be deducted as an adjustment to income on Form 1040, Schedule 1.

In terms of eligible business deductions, aside from direct expenses, Jacob may be entitled to deduct expenses associated with his home office, provided he meets IRS requirements. Expenses like utilities, a proportionate share of insurance, and depreciation may qualify. Likewise, costs for Martin’s disabled access equipment ($7,350) may qualify as a business expense, considering they enable him to perform his job.

Finally, after calculating gross income, deductions, credits, and self-employment taxes, the completed tax forms—primarily Form 1040, Schedule C, Schedule SE, and relevant credits—should be assembled and reviewed for accuracy before submission. Proper documentation and adherence to IRS instructions are crucial for compliance and maximizing allowable deductions and credits.

References

• Brennan, S. J. (2018). Tax cuts and jobs act’s effect on personal income tax. Pennsylvania CPA Journal.
• Cruz, A., Deschamps, M., Niswander, F., Prendergast, D., & Schisler, D. (2019). Fundamentals of taxation (6th ed.). McGraw-Hill.
• Mirsky, D. B. (2019). Examining the 2017–2018 tax law changes. CPA Journal.
• Mishkin, S., O’Brien, E., Salisbury, I., & White, M. C. (2019). Tax guide 2019. Money.
• Internal Revenue Service (IRS). (n.d.). www.IRS.gov
• Herman, T. (2014). Home-office deduction simplified. The Wall Street Journal.
• Intuit Inc. (2015). QuickBooks Online Self-Employed integration. Business Wire.
• Flynn, K. E., Belak, P., & Soltis, G. (2014). Understanding individual tax compliance. Journal of Business Case Studies.
• Everett, J. O., Hennig, C. J., Raabe, W. A., & Sonnier, B. M. (2013). Tax planning for net operating losses. Journal of Taxation.
• Korb, P. J., & Williams, J. L. (2014). Home office deduction methods. The CPA Journal.