Being Self-Employed : How to Run a Business Out of Your Home, Claim Travel and Depreciation and Earn a Good Income Well into Your 70s or 80s

by Crouch, Holmes F.

• ISBN13: 9780944817735
• ISBN10: 0944817734
• Edition: 2nd
• Format: Paperback
• Copyright: 2004-07-26
• Publisher: Allyear Tax Guides

Summary

Designed for navigating through the tax code, this guide helps the self-employed keep a greater percentage of their income. The importance of keeping up-to-date records, measuring net profits and losses, and handling the "SE tax"a flat tax which every self-employed person is subject tois discussed. Particular attention is paid to preparing for audits, changing tax status after marriage or divorce, and becoming financially confident through better knowledge of the tax code.

Author Biography

Holmes F. Crouch is a professional licensed tax practitioner. He is the author of Citizens Working Abroad, Family Tax Strategies, and Resolving Divorce Issues. He lives in Saratoga, California.

Table of Contents

1. GENERAL REQUIREMENTS	1-1	(1)
Workplace Human Types	1-2	(1)
Employee Experience Essential	1-3	(1)
Ever Examine a W-2?	1-5	(1)
Consistent, Timely Tax Returns	1-8	(1)
Savings and Investments	1-9	(1)
Calculated Risks and Insurance	1-10	(1)
Awareness of Lawsuits	1-11	(1)
Treatment of Customers	1-12	(1)
Importance of Spousal Support	1-14	(1)
2. HOW TAX DEFINED	2-1	(1)
Section 1401 Overview	2-2	(1)
Section 1402 Overview	2-3	(1)
"Net Earnings" Defined	2-4	(1)
Business "Gross Income"	2-6	(1)
Less the "Deductions Allowed"	2-7	(1)
Meaning of "Trade or Business"	2-9	(1)
Husband and Wife Business	2-10	(1)
Partnership Business	2-11	(1)
Statutory Exemptions Limited	2-13	(1)
3. KEEPING PROPER RECORDS	3-1	(1)
Why Records Important	3-2	(1)
Your "Official Notice"	3-3	(1)
Typical Mistakes Made	3-5	(1)
Business Bank Account	3-7	(1)
Keep Bank Records Available	3-8	(1)
Understanding Capitalization	3-10	(1)
Capital Account Records	3-11	(1)
Slow Moving Inventory	3-12	(1)
Simplified Expense Records	3-14	(1)
Codifying Your Expenditures	3-16	(1)
4. BUSINESS USE OF HOME	4-1	(1)
Section 280A(c): Introduction	4-2	(1)
Regular and Exclusive Use	4-4	(1)
Principal Place of Business	4-5	(1)
Meeting Place With Customers	4-6	(1)
Use of Separate Structure	4-8	(1)
Storage of Inventory	4-9	(1)
Day Care Services	4-10	(1)
Business Use Percentage	4-12	(1)
Applicable Expenses Prioritized	4-14	(1)
Form 8829: Overview	4-15	(1)
Direct vs. Indirect Expenses	4-16	(1)
File With Schedule C	4-18	(1)
5. DIRECT COST ITEMS	5-1	(1)
"Direct Costs" Defined	5-2	(1)
Returns and Allowances	5-3	(1)
Sales Tax, If Included	5-5	(1)
Cost of Goods Sold	5-7	(1)
Purchases for Resale	5-8	(1)
Labor and Other Costs	5-9	(1)
Materials and Supplies	5-11	(1)
Valuing Closing Inventory	5-12	(1)
Year-End Accounting	5-13	(1)
6. EMPLOYEES vs. NONEMPLOYEES	6-1	(1)
Employer ID Number	6-2	(1)
Liability for Withholdings	6-4	(1)
Backup Withholding Limited	6-5	(1)
Employee Form W-4	6-7	(1)
Nonemployee Form W-9	6-8	(1)
Payroll Paperwork	6-9	(1)
Employer Quarterly Returns	6-11	(1)
What If Nonemployees?	6-13	(1)
Independent Contractors	6-14	(1)
Impact of Reclassification	6-17	(1)
Toughing It Out	6-18	(1)
7. DEPRECIATION, ETC	7-1	(1)
Introduction to Form 4562	7-2	(1)
The $25,000 Election	7-3	(1)
MACRS Depreciation Explained	7- 5	(1)
The Depreciation Worksheet	7-7	(1)
"Listed Property" Explained	7-9	(1)
Business Mileage Log	7-11	(1)
Luxury Auto Limits	7-13	(1)
The Summary on Form 4562	7-16	(1)
Depreciation of Home	7-18	(1)
Improvements vs. Repairs	7-20	(1)
Amortizing Intangibles	7-21	(1)
Disposition of Assets	7-22	(1)
8. AWARENESS MATTERS	8-1	(1)
Inquiry Authority	8-2	(1)
"Cash Basis" Implications	8-3	(1)
Cash over $10,000	8-5	(1)
The 25% Omission Rule	8-7	(1)
Reconstruction of Income	8-9	(1)
All Businesses Codified	8-10	(1)
Special "Research" Audits	8-12	(1)
9. NET PROFIT OR LOSS	9-1	(1)
"Material Participation" Defined	9-3	(1)
Adding "Other Income"	9-4	(1)
Expense Deductions Overview	9-6	(1)
Some Practical Guidelines	9-8	(1)
Personal Expenses: No-No	9-9	(1)
The Capitalization Craze	9-11	(1)
Travel and Entertainment	9-12	(1)
Other Expenses: Various	9-14	(1)
Tentative Profit (Loss)	9-15	(1)
What If Net Loss	9-16	(1)
Effect of Loss on Form 1040	9-18	(1)
What If Consecutive Losses	9-20	(1)
10. SE AND ES TAXES	10-1	(1)
A "Per Worker" Tax	10-2	(1)
Schedules C, F, & K-1	10-3	(1)
The "Short" Schedule SE	10-5	(1)
The 92.35% Parity Factor	10-8	(1)
The "Long" Schedule SE	10-9	(1)
Mating with Form 1040	10-10	(1)
Now, the ES Tax	10-11	(1)
ES Voucher Forms	10-13	(1)
Tips on ES Payments	10-14	(1)
11. THE AUDIT STRIKE	11-1	(1)
Authority to Examine	11-2	(1)
The Selection Process	11-4	(1)
Two Basic Audit Types	11-6	(1)
Notification Letters	11-7	(1)
The Initial Probing	11-10	(1)
Examination Procedure: General	11-11	(1)
Bank Deposits Analysis	11-12	(1)
Report of Audit Changes	11-14	(1)
When-to-Disagree Example	11-17	(1)
How to Disagree	11-18	(1)
The 20% Accuracy Penalty	11-19	(1)
Reasonable Cause Exception	11-20	(1)
Why All This?	11-22	(1)
12. RETIREMENT SAVINGS	12-1
The Basic IRA Law	12-2	(1)
The Fundamental IRA Role	12-4	(1)
The Roth IRA Option	12-5	(1)
Features of a SEP IRA	12-8	(1)
SEPs for Self-Employeds	12-10	(1)
Selecting Contributory Percentages	12-11	(1)
The 3-Year Eligibility Period	12-13	(1)
Features of a SIMPLE IRA	12-14	(1)
Contribute Until You Retire	12-15