BRAVO & BRAVO

September 4, 2019

Free Tax Tips

Q1: How is income or loss from a business reported?

Answer 1: A Taxpayer who operates a business as a sole proprietor must figure income or loss from that business on Schedule C (F1040), Profit or Loss From Business & report it on Line 12 of F1040, Schedule 1, Additional Income & Adjustments to Income.

Q2: What expenses can be deducted by a business?

Answer 2: A deduction is allowed for all ordinary and necessary expenses paid or incurred during the tax year in carrying on a trade or business. However, in order to be deductible, the expenses must be reasonable in amount. Trade or business expenses are deductible from gross income on Schedule C.

Q3: What method of accounting is used for a business?

Answer Q3 : Generally, a taxpayer may choose one of the following methods of accounting?

1. The cash method

2. An accurate method

3. Any other method permitted by the tax code and regulations

4. Any combination of the foregoing methods, as permitted by the IRS.

Source: Wolters Kluwer. CCH Publications, “2018 Taxes Made Easy. ”

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