 Income tax 2023-2024, excise taxes, get ready and some coffee so we can recognize the code cracks when doing income tax preparation 2023-2024. Most of this information can be found in Publication 334, Tax Guide for Small Business for Individuals Who Use Schedule C Tax Year 2023, which you can find on the IRS website at irs.gov, irs.gov. Looking at the income tax formula, remember in the first half of the income tax formula it's basically a funny income statement. Most income statements having income minus expenses resulting in net income. Here having income minus various deductions resulting in taxable income. The Schedule C for the sole proprietor ultimately rolls into line one income of the formula which is strange given the fact that the Schedule C is basically an income statement of itself having business income minus business expenses, business deductions in other words resulting in net business income ultimately rolling into line one income of our income tax formula. Here's the first page of the Form 1040 where the Schedule C ultimately rolls into line number eight additional income from Schedule 1. Here's the Schedule 1 edition. Just a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us. But that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our Accounting Rocks product line. If you're not crunching cords using Excel, you're doing it wrong. A must-have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement, the obligation, a duty to share the tools necessary to properly channel the creative muse. And the muse she rarely speaks more clearly than through the beautiful symmetry of spreadsheets. So get the shirt because the creative muse she could use a new pair of shoes. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Additional income and adjustments to income part one where the Schedule C rolls into line three business income or loss from the Schedule C. Here is finally the Schedule C profit or loss from business which has a P and L profit and loss or income statement format income minus expenses. So now we're talking about excise taxes. Remembering keeping all these taxes straight in our mind the federal system for us to be funding what the federal government does which should be protecting us the military primarily we have an income tax the primary system. But we also talked about some other federal taxes which are often categorized as payroll taxes social security and Medicare but when we're sole proprietors on a Schedule C we have to deal with them with regards to self employment tax. Now we also could have state taxes remembering that the state taxes might tax on however the states want to because states should have the sovereignty to pay for the things that they're supposed to deal with not the military but like the police for example. So they might have an income tax on the state side and the local side you might have income taxes you might have sales taxes you might have real estate taxes and that kind of thing then we could also have the excise taxes which you could see basically on either level the federal level or the state level which could be directed more specifically towards particular industries. So they're going to be there for a particular goal typically in a particular industry. The most common example is probably going to be like taxes on gasoline the idea there being that the roads that are put in place because they're in between states because it's interstate commerce that's why the federal government kind of encroached on the state side of things in order to build free raise and whatnot which are going to go through different states and so on. The roads are for everyone the roads are basically free generally however that we have to pay for that some people get more benefit from the roads than other people some people they don't go on the road at all but they still benefit from it because they get deliveries and whatnot from people who do use the roads but even then they still use the roads far less than some businesses who could possibly make their entire revenue by using the roads. If you're a trucking company for example then clearly you're using the roads and making a profit on the infrastructure of the roads more over and above than like somebody else who doesn't use the roads at all but does get some deliveries from the roads and that kind of thing so the idea would be well if we tax gasoline which is necessary to drive on the roads that means that the people that use the roads more are the people that are going to be taxed more and we can use those proceeds to then fix the roads and in that way you're trying to allocate the cost of upkeep of the road to the people that are getting more benefit from the road so that kind of makes sense. You also get on the excise tax of things side of things things that are that possibly I'm not as in agreement with which are things to try to curb people's behavior and what I feel like is a manipulative way so they might say that we're going to give a tax on say alcohol and cigarettes and tobacco for example and the justification usually there is not so that we can get money to fund whatever we need to do like the roads or the military or the police it's a punitive thing the whole reason for the tax is to try to get people to stop using alcohol, tobacco or whatever by basically hitting them with the tax which will which will decrease the behavior due to economics meaning if it costs more they're going to do less of that that seems one a little bit manipulative to to me and two it also seems like it's hitting the people that are lower income it seems like a regressive tax oftentimes because the people that are indulged in these things are people that might have rougher times rougher jobs and so on and they're dealing with it with alcohol and tobacco and what not and now you're hitting them with a tax on that stuff so I'm not sure if that and three those things are addictive so the question is if you're dealing with something that is addictive does it really change people's behavior if you increase the price of it because it's an elastic right so really you're just increasing it you're collecting tax revenue from people that are addicted to these to these kind of things so but there's there's the argument for that you could you can make your argument on either side of that case so but that's the other and you can imagine if they start doing that kind of thing that it could they could take that this is number four reason why I don't like it there's a slippery slope once the government gets their finger in a taxation area they won't let it go right so you have these examples where people wanted to tax like large soda pops or something like a big gulp because they're trying to change people's behaviors to have them not drink sugary drinks and this kind of thing which again doesn't seem to me to be the way to teach people but you're trying to train the public to be smart and do things because they decided to do it their own choice is important to manipulate people to do a decision even if it's more healthy I don't think is beneficial in the long run to me but in any case major examples so this section identify some of the excise taxes you may have to pay and the forms you may have to file if you do any of the following so manufacture or sell certain products so operate certain kind of businesses use various kinds of equipment facilities or products receive payment for certain services so for more information on excise taxes you can see publication 510 excise taxes now we're not gonna spend a whole lot of time here because again these are industry specific things so if you're in a particular industry you're probably very aware of the excise taxes if you're not then the excise taxes might not be bothering you much right so form 720 the federal excise tax reported on form 720 quarterly federal excise tax return consists of several broad categories of taxes including the following so you've got the environmental taxes on the sale or use of zone zone depleting chemicals and imported products containing or manufactured with these chemicals so you might recall that before we had the crisis for like the global warming thing which basically they're going after carbon and the carbon dioxide I believe is the primary greenhouse gas that they're trying to figure out how that we can reduce we have the ozone thing before that where the ozone layer in a lot of spray cans and stuff had this ozone stuff in it and basically they made laws to reduce those types of chemicals now to my to my knowledge I'm not really sure it was the laws that really stopped us we did kind of make vast improvements on these types of things but to me it seemed like we what they did is they made the public aware of this problem and I think then capitalism I feel like is the thing that really drove the changes because they found out better ways to do spray bottles and what not without these chemicals which is what people desired and possibly was even cheaper in the long run so so I think and so that actually turned around now again you'll see some arguments on it well that's all because top-down government said this and that and that's what happened but I really I think it was more like public awareness and then the response that people had to people people wanting to do something about that problem and the and the innovation that really found their way out of it will have a similar kind of thing here with the with the carbon they want to put a carbon tax in place and that's the economic theory that that's the going economic which makes sense to some degree however it's difficult to gauge how that's going to work given the fact that it's not just us it's the entire world so it's going to be very difficult to imply a carbon tax on China for example who doesn't care at all about the these kind of global warming things all we're gonna you know we'll hurt ourselves at the cost of shipping the jobs over to China that are doing this kind of thing and so again interesting topic with these excise taxes communications and air transportation taxes you've got the fuel taxes so that's the big one if you're in like manufacturing and what not then you might need more like diesel fuel so here's another one where we're trying they're trying to move away from more clean fuels and efficient fuels but some kind of trucks and what not run better with like diesel fuels and and these types of things and then so now the question is do we put a tax on on those types of fuels and again those taxes somewhat makes sense as from the standpoint of I'm trying to tax people more that are using the infrastructure which everybody got basically through tax dollars and so it kind of makes sense to try to find ways to allocate the cost of the maintenance to people who get more benefit from like the roads so tax on the first at least in my mind these are my this is my thought price so tax on the first retail sale of heavy trucks out trailers and tractors manufacturers tax on the sale or use of a variety of different articles and then you got tax on indoor tanning services not exactly sure what that was about but form I don't have any tax tanning service businesses but they're popular where I'm at actually so but I don't know much about form 2290 there is a federal excise tax on the use of certain trucks truck tractors and buses on public highways so once again this kind of deals with that public highway situation which which is something that our tax dollars pay for on a federal level given the fact that their interstate commerce meaning the highways are going between states and therefore are not the responsibility of any individual state and so on so we need maintenance on those roads and who's in charge of the maintenance on those roads and how we're going to pay for that so the tax applies to vehicles having a taxable gross weight of 55 thousand pounds or more you would think that that would cause a bigger wear and tear on the road which means it might justify them paying more of the tax so that we can upkeep the road which kind of makes sense so report the tax on form 2290 heavy highway vehicle use tax return for more information you can see the instructions for form 2290 depositing excise taxes if you have a if you have to file a quarterly excise tax return on form 720 you may have to deposit your excise taxes before the return is due for details on depositing excise taxes see the instructions for form 720