Scott Butterfield is self-employed as a CPA. He uses the cash method of accounting, and his Social Security number is 644-47-7833. His principal business code is 541211. Scott's CPA practice is located at 678 Third Street, Riverside, CA 92860. Scott's income statement for the year shows the following: Income Statement Scott Butterfield, CPA Income Statement 12/31/2018 Current Period Prior Period 1/1/2017 to 12/31/2017 1/1/2018 to 12/31/2018 REVENUES Tax Services Accounting Services Other Consulting Services TOTAL REVENUES COST OF SERVICES $75,067.00 48,860.00 10,115.00 134,042.00 $72.154.00 50,256.00 7,690.00 130,100.00 Salaries Payroll Taxes Supplies TOTAL COST OF SERVICES GROSS PROFIT (LOSS) OPERATING EXPENSES 30,100.00 2.387.00 1,548.00 34,035.00 100,007.00 29,400.00 2.275.00 1,225.00 32.900.00 97,200.00 Advertising and Promotion 250.00 250.00 Business Licenses and Permits Charitable Contributions Continuing Education Dues and Subscriptions Insurance Meals Office Expense Postage and Delivery Printing and Reproduction Office Rent 3,500.00 870.00 5,400.00 350.00 250.00 275.00 300.00 3,500.00 875.00 5,500.00 150.00 50.00 100.00 14,000.00 865.00 2.978.00 29,193.00 Travel 13,800.00 750.00 2,724.00 27,544.00 Utilities TOTAL OPERATING EXPENSES NET INCOME (LOSS) $70,814.00 $69,656.00 Scott also mentioned the following: The expenses for dues and subscriptions were his country club membership dues for the year. The charitable contributions were made to a political action committee. Scott does not generate income from the sale of goods and therefore does not record supplies and wages as part of cost of goods sold. Scott placed a business auto in service on January 1, 2015 and drove it 3,829 miles for business, 3,250 miles for commuting, and 4,500 miles for nonbusiness purposes. His wife has a car for personal use. He maintains written records for the business use of the car. 1. Complete Schedule C for Scott showing Scott's net income from self-employment. Assume Scott has evidence to support his deductions. If required, only use the minus sign to indicate a net loss. When required, round amounts to the nearest dollar. SCHEDULE C OMB No. 1545-0074 Profit or Loss From Business (Form 1040) Department of the (Sole Proprietorship) 2018 Treasury Internal I Go to www.irs.gov/Schedule for instructions and the latest information. Attachment Revenue Service (99) Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065. Sequence No. 09 Name of proprietor Social security number (SSN) Scott Butterfield 644-47-7833 A Principal business or profession, including product or service (see instructions) B Enter code from instructions Accounting Services 541211 Business name. If no separate business name, leave blank. D Employer ID number (EIN), (see instr.) Business address (including suite or room no.) 678 Third Street City, town or post office, state, and ZIP code Riverside, CA 92860 Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you "materially participate in the operation of this business during 2018? If "No," see instructions for limit on losses Yes No H If you started or acquired this business during 2018, check here ....... I Did you make any payments in 2018 that would require you to file Form(s) 1099? (see instructions) ....... Yes No If "Yes," did you or will you file required Forms 1099?...... Yes No Part I 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... 34,042 2 Returns and allowances ........... 3 Subtract line 2 from line 1..................................................... 134,042 100,007 X 100,007 X 4 Cost of goods sold (from line 42)..................................... 5 Gross profit. Subtract line 4 from line 3........... 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) ... 7 Gross income. Add lines 5 and 6............ Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising .......... 8 3 50 1 8 Office expense (see instructions)... 9 Car and truck expenses see 19 Pension and profit-sharing plans .... instructions).... 20 Rent or lease (see instructions): ..... 10 Commissions and fees .... a Vehicles, machinery, and equipment ... Contract labor (see b Other business property ......... instructions) 12 Depletion ............ 21 Repairs and maintenance .. Depreciation and section 179 22 Supplies (not included in Part III)... 14,000 23 Taxes and licenses.... expense deduction (not included in Part III) (see instructions) 24 Travel and meals: 15 14 Employee benefit programs a Travel. ... 531X (other than on line 19).... b Deductible meals 15 Insurance (other than health) (see instructions) .... 5,500 X 16 Interest (see instructions): 25 Utilities ............... 2,978 a Mortgage (paid to banks, etc.) 16a 26 Wages (less employment credits).... b Other .. 16b 27a Other expenses (from line 48)..... 450 X 17 Legal and professional services 17 b Reserved for future use........ 28 Total expenses before expenses for business use of home. Add lines 8 through 27a .............. 25,084 X 29 Tentative profit or loss). Subtract line 28 from line 7.. 74,923 x 30 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..... 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 31 74,923 x 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 for Form 1040NR, line 32a All investment is 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates at risk. and trusts, enter on Form 1041, line 3. 32b Some investment . If you checked 32b, you must attach Form 6198. Your loss may be limited. is not at risk. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2018 36 Purchas 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) 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation ........ ................... Yes No 35 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 .............. 38 Materials and supplies . . . . . . . . . . . . . 39 Other costs ........................................... 40 Add lines 35 through 39............................................... 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) 1/1/15 Part IV 43 44 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. When did you place your vehicle in service for business purposes? (month, day, year) 1/1/15 Of the total number of miles you drove your vehicle during 2018, enter the number of miles you used your vehicle for: a Business 3,901 x b Commuting (see instructions) 3,250 c Other 4,500 45 Was your vehicle available for personal use during off-duty hours? Yes 46 Do you (or your spouse) have another vehicle available for personal use? ........... 47a Do you have evidence to support your deduction? .......... Yes b If "Yes," is the evidence written?.......................................... Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. Continuing Education Not applicable x 300 50 48 Total other expenses. Enter here and on line 27a ....... 350 X Schedule C (Form 1040) 2018 Feedback Check My Work A taxpayer who operates a trade or business or practices a profession as a sole proprietorship must file a tax return reporting his or her taxable income or loss from the commonly used tax form and, for many taxpayers, the net income reported on Schedule C is the primary component in their adjusted gross income. Taxpayers may deduct the actual expenses of transportation, or they may be entitled to use a standard mileage rate to calculate their deduction for transportation costs. 2. Complete the reconciliation of book expenses to tax expenses. Book expenses Total disallowed expenses for tax 2,750 x 26,088 x Additional expense deducted for tax Total Tax expenses 26,088 x Feedback Scott Butterfield is self-employed as a CPA. He uses the cash method of accounting, and his Social Security number is 644-47-7833. His principal business code is 541211. Scott's CPA practice is located at 678 Third Street, Riverside, CA 92860. Scott's income statement for the year shows the following: Income Statement Scott Butterfield, CPA Income Statement 12/31/2018 Current Period Prior Period 1/1/2017 to 12/31/2017 1/1/2018 to 12/31/2018 REVENUES Tax Services Accounting Services Other Consulting Services TOTAL REVENUES COST OF SERVICES $75,067.00 48,860.00 10,115.00 134,042.00 $72.154.00 50,256.00 7,690.00 130,100.00 Salaries Payroll Taxes Supplies TOTAL COST OF SERVICES GROSS PROFIT (LOSS) OPERATING EXPENSES 30,100.00 2.387.00 1,548.00 34,035.00 100,007.00 29,400.00 2.275.00 1,225.00 32.900.00 97,200.00 Advertising and Promotion 250.00 250.00 Business Licenses and Permits Charitable Contributions Continuing Education Dues and Subscriptions Insurance Meals Office Expense Postage and Delivery Printing and Reproduction Office Rent 3,500.00 870.00 5,400.00 350.00 250.00 275.00 300.00 3,500.00 875.00 5,500.00 150.00 50.00 100.00 14,000.00 865.00 2.978.00 29,193.00 Travel 13,800.00 750.00 2,724.00 27,544.00 Utilities TOTAL OPERATING EXPENSES NET INCOME (LOSS) $70,814.00 $69,656.00 Scott also mentioned the following: The expenses for dues and subscriptions were his country club membership dues for the year. The charitable contributions were made to a political action committee. Scott does not generate income from the sale of goods and therefore does not record supplies and wages as part of cost of goods sold. Scott placed a business auto in service on January 1, 2015 and drove it 3,829 miles for business, 3,250 miles for commuting, and 4,500 miles for nonbusiness purposes. His wife has a car for personal use. He maintains written records for the business use of the car. 1. Complete Schedule C for Scott showing Scott's net income from self-employment. Assume Scott has evidence to support his deductions. If required, only use the minus sign to indicate a net loss. When required, round amounts to the nearest dollar. SCHEDULE C OMB No. 1545-0074 Profit or Loss From Business (Form 1040) Department of the (Sole Proprietorship) 2018 Treasury Internal I Go to www.irs.gov/Schedule for instructions and the latest information. Attachment Revenue Service (99) Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065. Sequence No. 09 Name of proprietor Social security number (SSN) Scott Butterfield 644-47-7833 A Principal business or profession, including product or service (see instructions) B Enter code from instructions Accounting Services 541211 Business name. If no separate business name, leave blank. D Employer ID number (EIN), (see instr.) Business address (including suite or room no.) 678 Third Street City, town or post office, state, and ZIP code Riverside, CA 92860 Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you "materially participate in the operation of this business during 2018? If "No," see instructions for limit on losses Yes No H If you started or acquired this business during 2018, check here ....... I Did you make any payments in 2018 that would require you to file Form(s) 1099? (see instructions) ....... Yes No If "Yes," did you or will you file required Forms 1099?...... Yes No Part I 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... 34,042 2 Returns and allowances ........... 3 Subtract line 2 from line 1..................................................... 134,042 100,007 X 100,007 X 4 Cost of goods sold (from line 42)..................................... 5 Gross profit. Subtract line 4 from line 3........... 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) ... 7 Gross income. Add lines 5 and 6............ Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising .......... 8 3 50 1 8 Office expense (see instructions)... 9 Car and truck expenses see 19 Pension and profit-sharing plans .... instructions).... 20 Rent or lease (see instructions): ..... 10 Commissions and fees .... a Vehicles, machinery, and equipment ... Contract labor (see b Other business property ......... instructions) 12 Depletion ............ 21 Repairs and maintenance .. Depreciation and section 179 22 Supplies (not included in Part III)... 14,000 23 Taxes and licenses.... expense deduction (not included in Part III) (see instructions) 24 Travel and meals: 15 14 Employee benefit programs a Travel. ... 531X (other than on line 19).... b Deductible meals 15 Insurance (other than health) (see instructions) .... 5,500 X 16 Interest (see instructions): 25 Utilities ............... 2,978 a Mortgage (paid to banks, etc.) 16a 26 Wages (less employment credits).... b Other .. 16b 27a Other expenses (from line 48)..... 450 X 17 Legal and professional services 17 b Reserved for future use........ 28 Total expenses before expenses for business use of home. Add lines 8 through 27a .............. 25,084 X 29 Tentative profit or loss). Subtract line 28 from line 7.. 74,923 x 30 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..... 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 31 74,923 x 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 for Form 1040NR, line 32a All investment is 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates at risk. and trusts, enter on Form 1041, line 3. 32b Some investment . If you checked 32b, you must attach Form 6198. Your loss may be limited. is not at risk. For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11334P Schedule C (Form 1040) 2018 36 Purchas 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) 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation ........ ................... Yes No 35 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 .............. 38 Materials and supplies . . . . . . . . . . . . . 39 Other costs ........................................... 40 Add lines 35 through 39............................................... 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) 1/1/15 Part IV 43 44 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. When did you place your vehicle in service for business purposes? (month, day, year) 1/1/15 Of the total number of miles you drove your vehicle during 2018, enter the number of miles you used your vehicle for: a Business 3,901 x b Commuting (see instructions) 3,250 c Other 4,500 45 Was your vehicle available for personal use during off-duty hours? Yes 46 Do you (or your spouse) have another vehicle available for personal use? ........... 47a Do you have evidence to support your deduction? .......... Yes b If "Yes," is the evidence written?.......................................... Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. Continuing Education Not applicable x 300 50 48 Total other expenses. Enter here and on line 27a ....... 350 X Schedule C (Form 1040) 2018 Feedback Check My Work A taxpayer who operates a trade or business or practices a profession as a sole proprietorship must file a tax return reporting his or her taxable income or loss from the commonly used tax form and, for many taxpayers, the net income reported on Schedule C is the primary component in their adjusted gross income. Taxpayers may deduct the actual expenses of transportation, or they may be entitled to use a standard mileage rate to calculate their deduction for transportation costs. 2. Complete the reconciliation of book expenses to tax expenses. Book expenses Total disallowed expenses for tax 2,750 x 26,088 x Additional expense deducted for tax Total Tax expenses 26,088 x Feedback