Schedule C And Self Employment

Question 1

How much can you make before needing to pay Self Employment Tax?

Answer 1

$ 400
Self Employment tax pays the full amount required for Social Security and Medicare as opposed to an employment situation that is split 50/50 between the employee and employer. Taxpayer will get a credit for half.
This happens behind the scenes in Tax Slayer

Question 2

A self employed taxpayer will be thrilled to see that their expenses in Schedule C offset ALL of their income

Answer 2

False!! In such cases the return is “OUT IF SCOPE”. You may not ignore expenses in an effort to keep it in the scope of AARP tax Aid.
Big no no!

Question 3

Should a 1099 Misc be entered into the 1099-Misc form in TaxSlayer?

Answer 3

No. Enter info into 1099-NEC which will bring up Schedule C

Caveat- A poll worker may receive their income for this job on tax form 1099-Misc or 1099-NEC. Poll worker income should always be entered on 1099-Misc.

Royalty income that is income from someone elses business, say $ from rent paid to drill on your land will go on a 1099- Misc

However, Royalty income as income paid to taxpayer’s small business will go to schedule C and should be entered on 1099 NEC (even if the paper form brought in is 1099-Misc)

Question 4

Is there a limit to the amount of expenses that can go on a Schedule C via AARP Tax Aid?

Answer 4

Anything over $35,000 in expenses is OUT OF SCOPE

-TOOLS ARE LIMITED TO $ 2500 each tool
because depreciation is OUT OF SCOPE
- May go with Standard mileage (business miles from beginning work location to ending work location- no commuting miles)

If submitting specific car expenses insurance and property tax would be prorated. It’s best just to go with the Standard milage rate of .67 cents
-work portion or % of phone bill

-health Insc including Medicare

Question 5

A Self Employed taxpayer can expense what they pay for Health Insurance

Answer 5

Yes BUT
NOT if they had an option for health insurance through spouse etc

Question 6

Name some expenses that do not qualify
to be counted as a Self Employed expense

Answer 6

Personal meals, snacks, fines, tickets, late fees, club fees, political or charitable contributions, routine car wash, cost to rent
equipment.
TOOL PURCHASE up to $2500 is allowed.

Question 7

Premiums for disability insurance can be counted on Schedule C (self employed) under medical. True or false?

Answer 7

False

Question 8

Home remodeler, John filed s schedule C last year. This year he tells you that he formed an LLC for his remodeling business.
What are the repercussions of forming an LLC in terms of Tax Aid services?

Answer 8

• LLC’s are OUT OF SCOPE

-Also out of scope
-RENTALS ARE OUT OF SCOPE
-ANYTHING INVOLVING DEPRECIATION IS OUT OF SCOPE
-FARM INCOME
-businesses with an inventory
-Hobby income
-digital assets
-expenses over $35,000
- employees ir contract labor
- business use of home

Question 9

You and your spouse work together cleaning houses on the side. Because you are married filing jointly, will one Schedule C entered be enough?

Answer 9

No- complete a sched C for both giving each 50% of the income and expenses. This will be advantageous if they divorce as both will have credits toward Social Security and Medicare via Self Employment tax