How Your Tax Forms Fit Together
Here's a review of the key business tax forms you must file and the order you should be filling them out.
Form 8829 Expenses for Business Use of Your Home
On this form you will enter the numbers that will be used to determine your Time-Space Percentage. This includes the amount of square feet you used on a regularly basis for your business, the total square feet of your home and the number of hours you used your home for your business.
Enter all of your house-related expenses on this form, including: property tax, mortgage interest, rent (if you rent your home), utilities, house insurance, house repairs, and house depreciation.
If you live in the home where you do child care, you must file this form. If you don't, claim your house expenses directly on Schedule C Profit or Loss From Business.
Enter the amount from Form 8829, line 36 onto Schedule C, line 30.
Form 4562 Depreciation and Amortization
Enter on this form any items that cost more than $2,500 and were used in your business. This could include furniture, appliances, computer, fence, patio, home improvement, etc. Don't enter your house depreciation here. Instead, enter it on Form 8829.
Enter the amount from Form 4562, line 22 onto Schedule C, line 13.
Schedule C Profit or Loss From Business
Enter on this form your income and all other business expenses.Enter the amount from Schedule C, line 31 (your net income/profit) onto Form 1040 U.S. Individual Income Tax Return. In addition, enter the amount from Schedule C, line 31 onto Form 1040 SE Self-Employment Tax, line 2.
After entering your net income from Schedule C on line 2, fill out the rest of the form to determine your Social Security/Medicare tax on line 5. Enter this amount on Form 1040 U.S. Individual Income Tax Return. Also enter the amount on 1040 SE, line 6 (half of your Social Security/Medicare tax) onto your 1040 tax form. By doing so you will be deducting half of your Social Security/Medicare tax as a deduction that will reduce your personal income taxes.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.moneycrashers.com/common-federal-irs-tax-forms/
For more information on how to file your tax return, with detailed explanations on how to fill out each line on the above business tax forms, see my Family Child Care Tax Workbook and Organizer.
