Interactive Review
Course #10075
Tax Guide for Small Business
(Individuals who use Schedule C or C-EZ)
Filing and Paying Business Taxes……………......1
Accounting Periods and Methods……….……..…1
Dispositions of Business Property………….…….1
General Business Credit………………………….1
Business Income…………………..………………3
How To Figure Cost of Goods Sold…………...….2
Figuring Gross Profit ..…………………….……...1
Business Expenses ………………………..……...4
Figuring Net Profit or Loss ………….…………...1
Total Review Questions…………...…..…………15
Filing and Paying Business Taxes
1. If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or
U.S. possession, you cannot treat the business either as a sole proprietorship or a partnership.
Accounting Periods and Methods
2. You must adopt the calendar tax year if any of the following apply: you keep no books; have no annual accounting period, your present tax year does not qualify as a fiscal year, or your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations.
Dispositions of Business Property
3. If you receive money as a tenant for the cancellation of a lease, it is not considered a disposition of property.
4. Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits.
5. Bartering is an exchange of property or services that you are not required to
include in your gross income.
6. If you recover a bad debt or any other item deducted in a previous year you must always include the recovery in income on Schedule C or C-EZ.
7. You can avoid tax by having income paid to a third party.
How To Figure Cost of Goods Sold
8. If you contribute inventory (property that you sell in the course of your business), the
amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis.
How To Figure Cost of Goods Sold
9. Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business.
10. Businesses that sell services do not have to figure the cost of goods sold if the sale of merchandise is not an income producing factor for its business.
11. If you use your vehicle for both business and personal purposes, you may not deduct vehicle expenses.
12. You can deduct on Schedule C or C-EZ the interest you paid on personal loans if a loan is part business.
13. You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business.
14. If you have more than one business location including your home for a single trade or business, you cannot deduct expenses for the business use of your home under the principal place of business test.
15. If you have more than one business, you may figure your net profit or loss on a single Schedule C. CAUTION
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CPE Accounting and Tax Institute
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