 Income tax 2021, 2022, tax software example, business income or loss and other gains or losses. Get ready to get refunds to the max. Dive it in to income tax 2021, 2022. Here we are in our LASERT tax software. You don't need access to any tax software to follow along, but you might want to have access to the Form 1040, which you can find on the IRS website, irs.gov, irs.gov, our starting point being the single-filer Adam Smith living in Beverly Hills, 90210, 100,000 online, one starting out from the W2 income standard deduction at the 12,550, giving us the 87,450 on the taxable income, mirroring that then on our worksheet, the 100,000 standard deduction 87,450. Going back on over, letting the system calculate the tax at the 1515. That's going to be here 15015. That's our starting point. Now let's imagine we switch this thing up and say that instead of having 100,000 on the wages, let's say that they have Schedule C type of income. So now they're self-employed. Now note, we're only really concentrating right here on the flow through of the self-employment through the Schedule C. We'll talk a lot more about the other implications and impacts of a Schedule C type of business. It really opens up a whole lot of things. It does add a significant level to the complexity of the tax return, and it often leads to tax preparation, needing or clients needing not just tax preparation, but they're also going to need basically more projections. They might need accounting help and so on when they have these small business needs as well. You might need to do some adjustments or help them out with that kind of thing as well. So as a tax preparer, you really want to think about what kind of clients are you picking up? What's your business model? Are we picking up clients that have more difficult returns and we're putting more time into them? Do I want to pick up returns that have more consulting that's going to be needed and put more of my time into consulting, charging higher prices oftentimes for that kind of work? Or am I doing more simplified returns and doing a lot of them and trying to crank through the returns and then have a system to sort those out, possibly working with other people to shore up those things that you're not picking up in your practice, if you're doing it from a tax practice standpoint. So let's go to the first tab over here and I'm going to say, okay, let's say the income is not coming from the W2 income. We're going to say that there's a Schedule C, we'll also get into Schedule C businesses a lot more in future presentations. So I'm not going to enter all the data up top. I'm just going to show the flow through at this point in time. So let's say the gross income was something like, let's say 120,000 just to show that there could be some deductions, of course, down here. Let's put the deductions, let's just say advertising 20,000. So then if I go back on over to the forums and take a look at the Schedule C now, now I've got the 120,000 of the gross income and notice that all these expenses down here, these are going to be expenses that we used in order to consume or in order to generate the revenue are going to be deducted that we're going to have down here. So the net is going to get down to this 100,000. That net amount is what's going to flow through to the Schedule 1. There's the 100,000 here. That then is what's going to flow through to the first page of the 1040. So now we have the 100,000 not up top but down here in the other income system. Now note, you'll see that there's other changes. We'll talk more about at a later point in time because we're really just focused on the income at this point. But we also have the adjustments to income and we also have the self-employment that's going to be taken into consideration. So self-employment taxes like the Social Security and Medicare that has to be dealt with now that you're not getting it done through payroll taxes with the W-2 income. You got self-employment taxes. We'll talk about it. There's complexity with it because basically it's going to be calculated as if you're the employer and the employee. So you also get to deduct half of it and that gets confusing. We'll talk more about that in the Schedule C kind of area. But you can see online, I'm sorry, Schedule 2 here. And then we have the self-employment tax on the other taxes. And then if I go to Schedule 1, we're then going to have in page number 2, half of that being deductible. And if that pulls through to the first page of the 1040, first page of the 1040, now we've got the 100,000. We've got that adjustment 7,065, which we'll talk more about later. But that deductible portion, that's going to give us the 92,935. So if I was just going to kind of mirror this in our tax software, I'd have to add another schedule for the income. So I might add, say an income line. Let's put it right here. And so I'm going to add another one. I'm going to call it a Schedule C, a Schedule C. Just to mirror this out, I'm going to highlight the whole thing, right click and format this thing. And we'll make this into, we'll make it into, let's make it currency, brackets, get rid of the dollar sign, no decimals. And I'm going to call it Schedule C income. So we'll call it Schedule C income. Let's make the whole thing emboldened as well. I'm going to embolden the whole thing. And then you might have an income statement. So you might have say income, and then line items and expenses. Now oftentimes, you might not be putting in the data input into your worksheet here for income and expenses. That might be something your client provides you. And you might just put the net amount here to put into your schedule so that you can have it flow into your income statement. So but I'll just leave some space just in case, leave some space just in case. That's what I like to do. So I'm going to go up top and say this is going to be, let's make this blue and put some brackets around it, bracketizing it. I'm going to move this down one. Move it down. I need more room. Total income. Total income is on the outer side here equals the sum of these items of these items. And I said income was 120,000. And then the expenses I had advertising advertising, which I said was 20,000 20,000. I'll leave some room here. If you were doing an income statement, there would be substantial room. Again, if you were doing bookkeeping for them and helping to construct the income statement, you might do a whole another income statement worksheet, which I won't get into here. I'll just kind of reconstruct the general idea. And then what this is going to be total expenses, summing this up on the outside, summing this up. And then that's going to give us the tax net, let's say net income, net taxable income equals the revenue minus expenses. So you can see in essence, it's an income statement that we have here. What's being pulled over to the first page is the net amount. So notice I could pull this amount into the schedule one, which is basically what's done on the tax return. But I don't typically do that on my worksheet. I would just basically pull it all the way over to the to the tax formula, double click in the tax formula, I'm going to say plus the bottom line of my schedule C that 100,000 right there, adding into my income. And then on the income tab, I'm going to remove the W2 income. So now I've pulled in basically that 100,000 from a schedule C income. Then we had the adjustments to income. We'll talk more about them later. But notice we had an adjustment that's going to be taken place here for the self employment tax. I'm going to go to the adjustments. I'm going to bring us a little bit more room. Let's add some room here, insert. And I'm going to call it self self employment tax. So the deduction for the self employment tax. So in other words, if I go back on over here, I'm looking at schedule one, and we get to deduct half of the self employment tax. So we've got deductible part of the self employment tax 7065. So I could kind of recalculate it if I want, but I'm just going to data input depending on the salt one 7065. I'm going to make that blue going to add it to my total down here for my adjustments. So now we've got our adjustments. So I can see where that's coming from. And that pulls into line line two or the adjustments. So there's the 92 935 going back to my tax return. I'm see I could see where this is coming from. So I'm going to say, okay, there's the 92 935. And then we've got the standard deduction 12 550. And then we also have this qualified business income deduction, which can get fairly complicated, complicated as well. I'm just going to mirror that. I'm going to talk about that now. We might get into that more in the Schedule C, but substantial deduction 1677. I'm going to put that in page one for now. We might have a separate worksheet on later and put that at 1677. So I'm going to say that was 1677. That gets us to the 64 308. So there's the 64 308. And then on page two, we see the tax at the 990. So I'm going to put that here 990. And so there we have that. And then we also have, because of the self employment taxes, we've got the other taxes, other taxes pulling from Schedule two. So if I go to Schedule two, that's the other tax, huge tax, self employment tax, social security and Medicare in assets, pulling in from Schedule two to the second page of the 1040. So I might then go back on over here to my other, my other taxes. So I had other taxes on my worksheet, other tax, there it is, additional taxes right here. And then again, you could recalculate it, but I'm just going to manually put it in here. So we'll put it in here for now and let the system calculate it, the 14129, just to show you the different things that are going to feed into as you add the Schedule C, that then flowing into the 14129 back into the first page of the 1040 that flows in here. So the taxes at that 2429, which is going to be the 2429 going back to the first page of the 1040. And then you've got the 2429. So you can see all the different things. You kind of have to double check when you add basically that Schedule C income. It's a lot more complex. If you have the 100,000 of the Schedule C, even going further and beyond, just basically putting in the net income, basically income statement in the Schedule C, then if you have the W2 income, because all these other things are going to be impacted. Again, we'll talk about that more in the future. We're really kind of just focusing now on the flow through and how it flows through on the income side of this 100,000. Now the other thing that could happen that's business related is they sell like a piece of equipment, like a depreciable piece of equipment. For example, notice when you look at the Schedule C, it's just an income statement. So you've got the revenue minus the expenses on it. You don't basically have the balance sheet in place. And when you sell like a long-term asset, something like equipment, like a forklift or something like that, then you might have another schedule that would basically reporting that sale. So that's going to be this $47.97. So for example, here, we're just showing a quick example here of selling a misspelled forklift. It's a for-lift in any case. So we got the sales price $25,000. And then we've got the depreciation and then the cost here. So we've got this amount for the gain or loss of the $2,347, the $2,347, then flowing through to the Schedule 1. And so that's where you have this other gains and losses attaching Form 4797 that could also be impacted. Again, it would be something that could be an added complication if you've got a Schedule C type of business, although it would be more of an unusual kind of situation. We're not talking like normal sales. They're like inventory of stuff like that. You're typically talking about like sales of depreciable types of assets within the business.