Question on schedule C/F of Form 1040

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  • #2952287 Reply

    If for example, state taxes paid on earnings of a sole proprietorship are shown on Schedule A as an itemized deduction, well then what would the taxes consist of for the line item 23 for example on Schedule C consist of labeled “taxes and licenses”???

    FAR - 76

    AUD - 89

    BEC - 84

    REG - 86

    #2952413 Reply
    AusNat
    Participant

    Sales taxes, payroll taxes, and property taxes. Business licenses like a CPAs license renewal fees, liquor license fees, and real estate license fees.

    AUD - 94
    BEC - NINJA in Training
    FAR - 95
    REG - NINJA in Training
    Are we there yet?
    #2953043 Reply
    fassopony
    Participant

    Schedule C is a sole prop business form for business income and expenses.

    The Schedule A is for personal deductions.

    Two completely separate things.

    Taxes and license expenses for a Sch C are the company paid part of FICA, 940, L&I, SUTA, etc., as well as business licenses, excise taxes, etc. If you aren't sure about them look them up on IRS.gov.

    AUD - NINJA in Training
    BEC - NINJA in Training
    FAR - NINJA in Training
    REG - NINJA in Training
    Studying for FAR, then on to BEC, the AUD, and then REG
    #2953121 Reply
    AusNat
    Participant

    Here's the why to my answer from yesterday, because I think reg makes a lot more sense when you think about where things will go on the tax return and why.

    The taxes and licenses that go on sch C (or E or F) are expenses incurred by the business in order to generate revenue. They're INPUTS to net income on the schedule and thus to the taxpayer's AGI.

    The state income taxes that go on sch A are incurred by the taxpayer as a result of their taxable income. These taxes are an OUTPUT – AGI less deductions and credits = taxable income x tax rate = income tax liability. They can reduce federal tax for the individual, but they come in to play after NI for the business activity has been determined.

    AUD - 94
    BEC - NINJA in Training
    FAR - 95
    REG - NINJA in Training
    Are we there yet?
    #2953238 Reply
    fassopony
    Participant

    The Sch A has an income tax deduction and a state sales tax deduction and a property tax deduction (all added up to $10,000 max)

    The key here is that the A is for personal deductions whereas the C is for expenses. The Schedule C should be a replica of the businesses income statement or profit and loss.

    Is this a REG question or is the OP winging a tax return?

    AUD - NINJA in Training
    BEC - NINJA in Training
    FAR - NINJA in Training
    REG - NINJA in Training
    Studying for FAR, then on to BEC, the AUD, and then REG
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Reply To: Question on schedule C/F of Form 1040

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