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.