 Income tax 2021-2022, business income part number four. Get ready to get refunds to the max, diving into income tax 2021-2022. Most of this information can be found in Publication 334, Tax Guide for Small Business Tax Year 2021, Income Tax Formula, Line 1, Income. Although we would have another schedule that being an income statement in essence with income and expenses, expenses basically being deductions, the net then flowing in to line one income of the formula, as well as page one of form 1040 line number eight, where here we would have the schedule C flowing into schedule one, flowing into page one of the form 1040 line number eight. Then we have the schedule C we're considering the profit and loss we're envisioning in our mind looking at the income, focusing in on income line item. So now we have interest and dividend income. When we have a taxpayer that has a sole proprietor business that reports income on a schedule C, they also might have interest and dividend income. And the general rule what we usually think of when we hear interest and dividend income is we think about like stocks and bonds, types of investments. And oftentimes those are going to be invested on the personal side. So the general rule is that they might have the schedule C business and then they've got personal investments in things like the stocks and bonds generating hopefully interest and dividends typically reported on a schedule B separate from the business. And one reason we kind of think that way is that like if you have a business that's like a landscaping business or something like that and you start to generate revenue on it and now you have excess cash, then we don't typically think of it as basically putting the excess cash and the sole proprietorship into something like stocks and bonds, for example, which would be generating interest and dividends. We usually think of the idea would be that you're going to distribute the money from the business to the owner. Now the owner is going to take that money and put it into personal investments in stocks and bonds. So that would be kind of like what we would typically see. Then you've got kind of exceptions to the rules where we would have interest and dividends which would be within the business part of the business income. So first let's look at interest. We have the interest received on notes received that you have accepted in the ordinary course of business is business income. So in the ordinary course of doing business you have notes that are being put in place like an accounts receivable that has interest compiled on it so possibly you do work for example and you say I don't just want to get paid in 30 days. I'll let you pay me in an extended period of time over a year or something like that. But then I want to accrue interest on it. Well then of course you have interest income from a note like that. Interest received on loans is business income if you are the business of the lending money. So if you're lending money out that is your business. You've lend money out then you're getting paid interest. And so in that case of course the interest isn't coming from like a passive investment like bonds for example. It's you're actively the lender. And so of course that would be your business and that would be part of income. Uncollectible loans if a loan payment to you becomes uncollectible during the tax year and you use an accrual method of accounting you must include in gross income interest accrued up to the time the loan became uncollectible and then if the accrued interest later becomes uncollectible you may be able to take bad debt deduction. So you might have to calculate the interest and then think about the bad debt. So if you if you want to dig into that more detail that'd be chapter 8 of the publication. Unstated interest if a little or no interest is charged on an installment sale you may have to treat a part of each payment as unstated interest. So if you make an installment sale then you're extending the payment over a longer period of time. And so you would think that if the payment is extended over a long period of time there has to be interest involved if it was a more an arms length transaction whether the interest be stated in the agreement or not. So if you just if you just set up the agreement and say you're going to pay me you know this much over this time frame and there's no interest that has been calculated then you might have to impute or calculate the some kind of interest and assume that part of the payments that you're receiving is interest because the idea being that if you made if you were to sell something today your goods and services today for ten thousand dollars and they gave you ten thousand dollars today then then it wouldn't be the same as if you were to say okay now give me ten thousand dollars over that the next five years that wouldn't really happen. You'd probably say something like this you'd probably say okay give me twelve thousand dollars over the next five years and so that means you've kind of imputed interest in it because of the time value of money so now you've got to you've got to possibly include that include that calculate that so that so then we got dividends generally dividends are business income to dealers and securities for most sole proprietors and statutory employees however dividends are non-business income if you hold stock as a personal investment separately from your business activity the dividends from the stock are non-business income that would be the general thing that would come to mind most of the time with dividends because again you would imagine if they have a sole proprietorship business that when the money has generated or accumulated they would take it out of the business in order to put it in a personal investment and therefore the dividends on the investment on things like mutual funds stocks and bonds would be a personal dividend income on schedule B possibly instead of schedule C if you receive dividends from business insurance premiums you deducted in an earlier year you must report all or part of the dividends as business income on your return to find out how much you have to report see recovery of items previously deducted under other income