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 o Lubricants for Equipment $9,670.00 o Insurance $6,500.00 o Wages $6,300.00 o Vehicles $1,768.00 o Legal and Professional Expenses $1,750.00 o Taxes and Licenses $1,412.00 o 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. 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. SCHEDULEC (Form 1040) Department of the Treasury Internal Revenue Service (99) Profit or Loss From Business OMB No. 1545-0074 (Sole Proprietorship) 2018 Go to www.irs.gov/Schedule for instructions and the latest information. Attachment Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065. Sequence No. 09 Social security number (SSN) Name of proprietor A Principal business or profession, including product or service (see instructions) B Enter code from instructions C Business name. If no separate business name, leave blank. D Employer ID number (EIN) (see instr.) TOILU Business address (including suite or room no.) City, town or post office, state, and ZIP code Accounting method: (1) Cash (2) Accrual (3) Other (specify) Did you "materially participate in the operation of this business during 2018? If "No," see instructions for limit on losses Yes No If you started or acquired this business during 2018, check here. . . . Did you make any payments in 2018 that would require you to file Form(s) 1099? (see instructions). . . . . . . Yes No J If "Yes," did you or will you file required Forms 1099? Yes No Part | Income 1 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the "Statutory employee" box on that form was checked. . . . . . . . . 2 Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . 3 Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . 4 Cost of goods sold (from line 42) . . . . . . . . . . . . . . . . . . . . 5 Gross profit. Subtract line 4 from line 3. . . . . . . 5 . . . . . . . . . . . . 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) . 7 Gross income. Add lines 5 and 6 . . . . . . . . . . . . 7 Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising . . . . . 8 18 Office expense (see instructions) 18 9 Car and truck expenses (see 19 Pension and profit-sharing plans 19 . instructions). . . . . L 20 Rent or lease (see instructions): 10 Commissions and fees . 10 a Vehicles, machinery, and equipment 20a 11 Contract labor (see instructions) 11 b Other business property . . . 20b Depletion . . . . . 12 21 Repairs and maintenance . . . 21 Depreciation and section 179 22 Supplies (not included in Part III) . 22 expense deduction (not 23 Taxes and licenses. . . included in Part III) (see . . 23 instructions. . . . . 24 Travel and meals: 14 Employee benefit programs a Travel. . . . . . . . . 24a (other than on line 19). . b Deductible meals (see 15 Insurance (other than health) 15 instructions) . . . . . . . 24b 16 Interest (see instructions): 25 Utilities . . . . . . . . 25 a Mortgage (paid to banks, etc.) 16a 26 Wages (less employment credits). 26 b Other . . . . . . 16b 27a Other expenses (from line 48) . 27a 17 Legal and professional services 17 b Reserved for future use. . . 27b 28 Total expenses before expenses for business use of home. Add lines 8 through 27a . . . . . . 28 29 Tentative profit or loss). Subtract line 28 from line 7. . . . . . . . . . . . . . . . . 29 Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Simplified method filers only: enter the total square footage of: (a) your home: and (b) the part of your home used for business: . Use the Simplified Method Worksheet in the instructions to figure the amount to enter on line 30... . . . 30 31 Net profit or loss). Subtract line 30 from line 29. If a profit, enter on both Schedule 1 (Form 1040), line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32 32 If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Schedule 1 (Form 1040), line 12 (or Form 1040NR, 32a All investment is at risk. line 13) and on Schedule SE, line 2. (if you checked the box on line 1, see the line 31 instructions). 32b Some investment is not Estates and trusts, enter on Form 1041, line 3. at risk. If you checked 32b, you must attach Form 6198. Your loss may be limited. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2018 13 14 30 Page 2 Schedule C (Form 1040) 2018 Part III Cost of Goods Sold (see instructions) 33 Method(s) used to value closing inventory: a Cost b Lower of cost or market Other (attach explanation) Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation . . . . . . . . . . . . . . . . . . . . . ... . . . Yes No Inventory at beginning of year. If different from last year's closing inventory, attach explanation. .. 35 Purchases less cost of items withdrawn for personal use..... .. . . .. .. 37 Cost of labor. Do not include any amounts paid to yourself. .. . . .. .. . . . Materials and supplies , . . . . . . . . . . . . . . Other costs. . .. . . 40 Add lines 35 through 39 . . . . ... . . .. . .. . .. . . . . .. 40 41 Inventory at end of year, . . . . . . . . . . . . . . . . . . . . . . 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4. Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562. 43 When did you place your vehicle in service for business purposes? (month, day, year) .. 44 of the total number of miles you drove your vehicle during 2018, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) c Other 45 Was your vehicle available for personal use during off-duty hours? .. . . . . . . .. . . . .. 46 OOOO Do you for your spouse) have another vehicle available for personal use?..... . . .. . .. .. No Yes Yes Yes 47a Do you have evidence to support your deduction? .................... "Yesis the evidence written? . . . . . . . . . . ... Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. No 48 Total other expenses. Enter here and on line 27a . . . . . . . . . . . . 48 Schedule C (Form 1040) 2018 OMB No. 1545-0074 2018 SCHEDULE SE (Form 1040) Self-Employment Tax Go to www.irs.gov/ScheduleSE for instructions and the latest information Department of the Treasury Internal Revenue Service (99 Attach to Form 1040 or Form 1040NR. Name of person with self-employment income (as shown on Form 1040 or Form 1040NR) Social security number of person with self-employment income Altachment Sequence No. 17 Before you begin: To determine if you must file Schedule SE, see the instructions May I Use Short Schedule SE or Must I Use Long Schedule SE? Note: Use this flowchart only if you must file Schedule SE. If unsure, see Who Must File Schedule SE in the instructions. Did you receive wages or tips in 2018? Yes Are you a minister, member of a religious order, or Christian Science practitioner who received IRS approval not to be taxed on earnings from these sources, but you owe self-employment tax on other earnings? Was the total of your wages and tips subject to social security or railroad retirement tier 1) tax plus your net earnings from self-employment more than $128.4007 Are you using one of the optional methods to figure your net earnings (see instructions)? Did you receive tips subject to social security or Medicare tax that you didn't report to your employer? Yes Did you receive church employee income (see instructions) reported on Form W-2 of $108.28 or more? Did you report any wages on Form 8919, Uncollected Social Yes Security and Medicare Tax on Wages? You may use Short Schedule SE below You must use Long Schedule SE on page 2 Section A-Short Schedule SE. Caution: Read above to see if you can use Short Schedule SE. 1b 1a Net farm profit or loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, code A. . . . . . . . . . b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH 2 Net profit or loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1. Ministers and members of religious orders, see instructions for types of income to report on this line. See instructions for other income to report . . . . . . . . . . . . . . Combine lines 1a, 1b, and 2 . . . . . . . . . . . . . . . . . . . . . Multiply line 3 by 92.35% (0.9235). If less than $400, you don't owe self-employment tax, don't file this schedule unless you have an amount on line 1b. . . . . . . . . . . . . Note: If line 4 is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. Self-employment tax. If the amount on line 4 is: $128,400 or less, multiply line 4 by 15.3% (0.153). Enter the result here and on Schedule 4 (Form 1040), line 57, or Form 1040NR, line 55 . More than $128,400, multiply line 4 by 2.9% (0.029). Then, add $15,921.60 to the result. Enter the total here and on Schedule 4 (Form 1040), line 57, or Form 1040NR, line 55. . Deduction for one-half of self-employment tax. Multiply line 5 by 50% (0.50). Enter the result here and on Schedule 1 (Form 1040), line 27, or Form 1040NR, line 27 6 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11358Z Schedule SE (Form 1040) 2018 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 o Lubricants for Equipment $9,670.00 o Insurance $6,500.00 o Wages $6,300.00 o Vehicles $1,768.00 o Legal and Professional Expenses $1,750.00 o Taxes and Licenses $1,412.00 o 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. 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. SCHEDULEC (Form 1040) Department of the Treasury Internal Revenue Service (99) Profit or Loss From Business OMB No. 1545-0074 (Sole Proprietorship) 2018 Go to www.irs.gov/Schedule for instructions and the latest information. Attachment Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065. Sequence No. 09 Social security number (SSN) Name of proprietor A Principal business or profession, including product or service (see instructions) B Enter code from instructions C Business name. If no separate business name, leave blank. D Employer ID number (EIN) (see instr.) TOILU Business address (including suite or room no.) City, town or post office, state, and ZIP code Accounting method: (1) Cash (2) Accrual (3) Other (specify) Did you "materially participate in the operation of this business during 2018? If "No," see instructions for limit on losses Yes No If you started or acquired this business during 2018, check here. . . . Did you make any payments in 2018 that would require you to file Form(s) 1099? (see instructions). . . . . . . Yes No J If "Yes," did you or will you file required Forms 1099? Yes No Part | Income 1 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the "Statutory employee" box on that form was checked. . . . . . . . . 2 Returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . 3 Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . 4 Cost of goods sold (from line 42) . . . . . . . . . . . . . . . . . . . . 5 Gross profit. Subtract line 4 from line 3. . . . . . . 5 . . . . . . . . . . . . 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) . 7 Gross income. Add lines 5 and 6 . . . . . . . . . . . . 7 Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising . . . . . 8 18 Office expense (see instructions) 18 9 Car and truck expenses (see 19 Pension and profit-sharing plans 19 . instructions). . . . . L 20 Rent or lease (see instructions): 10 Commissions and fees . 10 a Vehicles, machinery, and equipment 20a 11 Contract labor (see instructions) 11 b Other business property . . . 20b Depletion . . . . . 12 21 Repairs and maintenance . . . 21 Depreciation and section 179 22 Supplies (not included in Part III) . 22 expense deduction (not 23 Taxes and licenses. . . included in Part III) (see . . 23 instructions. . . . . 24 Travel and meals: 14 Employee benefit programs a Travel. . . . . . . . . 24a (other than on line 19). . b Deductible meals (see 15 Insurance (other than health) 15 instructions) . . . . . . . 24b 16 Interest (see instructions): 25 Utilities . . . . . . . . 25 a Mortgage (paid to banks, etc.) 16a 26 Wages (less employment credits). 26 b Other . . . . . . 16b 27a Other expenses (from line 48) . 27a 17 Legal and professional services 17 b Reserved for future use. . . 27b 28 Total expenses before expenses for business use of home. Add lines 8 through 27a . . . . . . 28 29 Tentative profit or loss). Subtract line 28 from line 7. . . . . . . . . . . . . . . . . 29 Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Simplified method filers only: enter the total square footage of: (a) your home: and (b) the part of your home used for business: . Use the Simplified Method Worksheet in the instructions to figure the amount to enter on line 30... . . . 30 31 Net profit or loss). Subtract line 30 from line 29. If a profit, enter on both Schedule 1 (Form 1040), line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32 32 If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Schedule 1 (Form 1040), line 12 (or Form 1040NR, 32a All investment is at risk. line 13) and on Schedule SE, line 2. (if you checked the box on line 1, see the line 31 instructions). 32b Some investment is not Estates and trusts, enter on Form 1041, line 3. at risk. If you checked 32b, you must attach Form 6198. Your loss may be limited. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2018 13 14 30 Page 2 Schedule C (Form 1040) 2018 Part III Cost of Goods Sold (see instructions) 33 Method(s) used to value closing inventory: a Cost b Lower of cost or market Other (attach explanation) Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation . . . . . . . . . . . . . . . . . . . . . ... . . . Yes No Inventory at beginning of year. If different from last year's closing inventory, attach explanation. .. 35 Purchases less cost of items withdrawn for personal use..... .. . . .. .. 37 Cost of labor. Do not include any amounts paid to yourself. .. . . .. .. . . . Materials and supplies , . . . . . . . . . . . . . . Other costs. . .. . . 40 Add lines 35 through 39 . . . . ... . . .. . .. . .. . . . . .. 40 41 Inventory at end of year, . . . . . . . . . . . . . . . . . . . . . . 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4. Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562. 43 When did you place your vehicle in service for business purposes? (month, day, year) .. 44 of the total number of miles you drove your vehicle during 2018, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) c Other 45 Was your vehicle available for personal use during off-duty hours? .. . . . . . . .. . . . .. 46 OOOO Do you for your spouse) have another vehicle available for personal use?..... . . .. . .. .. No Yes Yes Yes 47a Do you have evidence to support your deduction? .................... "Yesis the evidence written? . . . . . . . . . . ... Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. No 48 Total other expenses. Enter here and on line 27a . . . . . . . . . . . . 48 Schedule C (Form 1040) 2018 OMB No. 1545-0074 2018 SCHEDULE SE (Form 1040) Self-Employment Tax Go to www.irs.gov/ScheduleSE for instructions and the latest information Department of the Treasury Internal Revenue Service (99 Attach to Form 1040 or Form 1040NR. Name of person with self-employment income (as shown on Form 1040 or Form 1040NR) Social security number of person with self-employment income Altachment Sequence No. 17 Before you begin: To determine if you must file Schedule SE, see the instructions May I Use Short Schedule SE or Must I Use Long Schedule SE? Note: Use this flowchart only if you must file Schedule SE. If unsure, see Who Must File Schedule SE in the instructions. Did you receive wages or tips in 2018? Yes Are you a minister, member of a religious order, or Christian Science practitioner who received IRS approval not to be taxed on earnings from these sources, but you owe self-employment tax on other earnings? Was the total of your wages and tips subject to social security or railroad retirement tier 1) tax plus your net earnings from self-employment more than $128.4007 Are you using one of the optional methods to figure your net earnings (see instructions)? Did you receive tips subject to social security or Medicare tax that you didn't report to your employer? Yes Did you receive church employee income (see instructions) reported on Form W-2 of $108.28 or more? Did you report any wages on Form 8919, Uncollected Social Yes Security and Medicare Tax on Wages? You may use Short Schedule SE below You must use Long Schedule SE on page 2 Section A-Short Schedule SE. Caution: Read above to see if you can use Short Schedule SE. 1b 1a Net farm profit or loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, code A. . . . . . . . . . b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH 2 Net profit or loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1. Ministers and members of religious orders, see instructions for types of income to report on this line. See instructions for other income to report . . . . . . . . . . . . . . Combine lines 1a, 1b, and 2 . . . . . . . . . . . . . . . . . . . . . Multiply line 3 by 92.35% (0.9235). If less than $400, you don't owe self-employment tax, don't file this schedule unless you have an amount on line 1b. . . . . . . . . . . . . Note: If line 4 is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. Self-employment tax. If the amount on line 4 is: $128,400 or less, multiply line 4 by 15.3% (0.153). Enter the result here and on Schedule 4 (Form 1040), line 57, or Form 1040NR, line 55 . More than $128,400, multiply line 4 by 2.9% (0.029). Then, add $15,921.60 to the result. Enter the total here and on Schedule 4 (Form 1040), line 57, or Form 1040NR, line 55. . Deduction for one-half of self-employment tax. Multiply line 5 by 50% (0.50). Enter the result here and on Schedule 1 (Form 1040), line 27, or Form 1040NR, line 27 6 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11358Z Schedule SE (Form 1040) 2018