Sole Proprietorship OperationNational Society of Tax Professionals Tax Return Filing RequirementsSeparate businesses National Society of Tax Professionals A Separate Schedule C for Each Separa ID: 899578
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1 National Society of Tax Professionals
National Society of Tax Professionals Sole Proprietorship Operation National Society of Tax Professionals Tax Return Filing Requirements Separate businesses National Society of Tax Professionals A Separate Schedule C for Each Separate Business National Society of Tax Professionals Husband & Wi
2 fe Businesses Conduct of a “trade o
fe Businesses Conduct of a “trade or business” where National Society of Tax Professionals A Separate Schedule S/E Defines “legal ownership interest” in the National Society of Tax Professionals Ease of Liquidation or Sale Subjected to “recapture” rulesNational Society of Ta
3 x Professionals Sec. 280A Home Offi
x Professionals Sec. 280A Home Office Deduction National Society of Tax Professionals Home Office Deduction The “function” test of the Soliman decision National Society of Tax Professionals Medical Insurance Premiums National Society of Tax Professionals Pension Plans Available Nation
4 al Society of Tax Professionals Hir
al Society of Tax Professionals Hiring of Related Parties National Society of Tax Professionals Hobby vs. Business & At- Risk Limitations National Society of Tax Professionals Schedule C Issues Facing the Tax ProfessionalNational Society of Tax ProfessionalsPaul La Monaca, Director of Education Nati
5 onal Society of Tax Professionals 1
onal Society of Tax Professionals 1 Sole Proprietorship Operation Simplest business entity to create One owner: no agreements required and files no documents with federal governmentCapital structure not independent from the ownerNo separate federal income tax return required: Form 1040-Schedule C National Soc
6 iety of Tax Professionals 2 Tax Ret
iety of Tax Professionals 2 Tax Return Filing Requirements Separate businesses National Society of Tax Professionals 3 A Separate Schedule C for Each Separate Business Rev. Rul. 81-90Prevents disguising losses of one activity against another activity with gainsSec. 6011(a) provides that regulations may
7 prescribe separate reporting in instruct
prescribe separate reporting in instructions and formsSec. 6662(a) accuracy penalties may be imposed if intentional disregard or National Society of Tax Professionals 4 Husband & Wife Businesses Conduct of a “trade or business” where National Society of Tax Professionals 5 A Separate Schedule
8 S/E Defines “legal ownership inter
S/E Defines “legal ownership interest” in the National Society of Tax Professionals 6 Ease of Liquidation or Sale Subjected to “recapture” rules National Society of Tax Professionals 7 Sec. 280A Home Office Deduction Principal place of business testUsed “exclusively and regularl
9 y” by taxpayer to conduct “adm
y” by taxpayer to conduct “administrative or management activities” of a trade or businessNo other fixed location where taxpayer conducts “substantial” administrative or management activities of the business National Society of Tax Professionals 8 Home Office Deduction The “functi
10 on” test of the Soliman decision N
on” test of the Soliman decision National Society of Tax Professionals 9 Medical Insurance Premiums Sec. 162(l) provides deductibility: Page 1 of Form 1040 for Health and Long-term Care (age limitations)Coverage for taxpayer, spouse and dependentsMonths during year when taxpayer is self-employedNot elig
11 ible to participate in a subsidized plan
ible to participate in a subsidized plan National Society of Tax Professionals 10 Pension Plans Available Simplified Employee Pensions: SEPsKeogh and Profit Sharing PlansIndividual Sec. 401(k) Plans SIMPLE Plans National Society of Tax Professionals 11 Hiring of Related Parties Deductible compensation and
12 benefits allowable for spouses and chil
benefits allowable for spouses and children providing services to or for the businessChildren under age 18 not subjected to Social Security and MedicareReduction of taxpayer’s AGIReduction of family unit’s tax National Society of Tax Professionals 12 Hobby vs. Business & At- Risk Limitations Sec. 1
13 83: no deduction for an activity not eng
83: no deduction for an activity not engaged in for profit Deductions to extent of income generated from the particular activityBurden of proof: Reg. Sec. 1.183-2(b) factors which help in determining trade or business statusAt-risk Issues: Sec. 465(b)(3)(C), 267(b) & 707(b)(1) National Society of Tax Professionals