Question

Use the information provided below to Prepare Schedule C and Form 4562 for tax year 2017.

SCHEDULE C AND FORM 4562 TAX YEAR 20 «WN MILLER İS SELF-EMPLOYED. SHE SELLS USED FURNITURE AND BOOKS, SHE DOES MAINTAIN AN INVENTORY. SHE RECEIVES ORDERS FOR ITEMS. LOCATES THEM BUYS, AND RESELLS THEM. HER SOCIAL SECURITY NUMBER IS 581-23-4497. SHE USES PART OF HER HOME AS A HOME OFFICE REGULARLY AND EXCLUSIVELY, HER ADDRESS IS 37 sowAMS ROAD. WARREN, RI 02835. SHE STARTED THE BUSINESS ON 1/1/17 AND USES THE CASH BASIS OF ACCOUNTING. THE FOLLOWING ARE HER REVENUES AND EXPENSES: GROSS RECEIPTS FROM SALES INTEREST INCOME ON BUSINESS CHECKING ACCOUNI COST OF GOODS SOLD SALARY EXPENSE (PART-TIME EMPLOYEE) MEALS AND ENTERTAINMENT EXPENSE EMPLOYER PAYROLL TAXES OFFICE SUPPLIES TELEPHONE EXPENSE NTERNET EXPENSE ADVERTISING EXPENSE POLITICAL CONTRIBUTIONS TRAVEL EXPENSE SELF-EMPLOYED HEALTH INSURANCE EXPENSE 288.188 250 117,200 17,300 5.600 4,100 9,100 4.200 1,200 3.300 1.000 2.400 6,800 OTHER INFORMATION ANN PURCHASED DEPRECIABLE ASSETS FOR HER NEW BUSINESS ON 1/10/17: NEW COMPUTER EQUIPMENT (5-YEAR PROPERTY) NEW OFFICE FURNITURE AND FIXTURES (7-YEAR PROPERTY) DELIVERY WAREHOUSE, INCLUDING 10%LAND 8,500 19.000 85,000 SHE WANTS TO ELECT SECTION 179 ON THE COMPUTER. SHE DOES NOT ELECT OUT OF BONUS DEPRECIATION ANN USES HER PERSONAL VEHICLE TO GO TO TRADE SHOWS, YARD SALES. ETC FOR BUSINESS PURPOSES. SHE USES THE STANDARD MILEAGE METHOD FOR DEDUCTING AUTO EXPENSES. HER TOTAL MILEAGE FOR THE YEAR IS 9,200. THE BUSINESS MILEAGE IS 6,900. THE STANDARD RATE FOR 2017 IS 53.5 CENTS PER MILE. ANN USES THE SIMPLIFIED METHOD FOR THE HOME OFFICE EXPENSE DEDUCTION TOTALAREA OF HOME (SQUARE FEET) HOME OFFICE AREA (SQUARE FEET) 2,100 300

Prepare Schedule C and Form 4562 for tax year 2017 using above information and the forms below

See attached tax form links below:

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

https://www.irs.gov/pub/irs-pdf/f4562.pdf

Hints: total depreciation is $19,931 and net profit (line 31) is $101,465. Do not worry if you are a few dollars off due to rounding.

Also, calculate the self-employment tax on this income. The taxpayer does not have any other earned income.

Answer 1

The self-employment tax on this Income considering Ann has no other source of Revenue is calculated as :

$100,489 * 15.3% = $15,375

This tax comprises of Social Security taxes @ 12.4% which is equal to $12,460

and Medicare taxes @ 2.9% which is equal to $2,915.