 So now we're thinking about the method which most methods that come to mind of the two that come to mind Usually is a cash-based or a cruel based method Oftentimes we think about those methods as completely opposite from each other They're not however because you could have a system. That's kind of a hybrid of the two Many small businesses for example are gonna be on a cash-based system for their expenses because they pay all their expenses with Electronic transfers for example, and you could set up that easily But they might be on the cruel basis basically for the revenue Because they're in the type of business where they happen to have to invoice the client for work that was done And so then the question is can I can I be in like a hybrid type of method? What kind of accounting method? Maybe there's some method or some accounting trick you could you know you Can I use does inventory force me for example to use an accrual method versus a cash-based method? Which is if you have inventory kind of puts a complexity in terms of your Decisions on what method to use sometimes this one also gets a little get confusing because when we think about taxes in general We're usually on a cash-based system right when we're thinking about our schedule a items When can I deduct my property taxes or when can I deduct my mortgage interest usually? It's when you paid it But on the business side of things normally for large companies On a cruel basis is more accurate than a cash-based system oftentimes But we might have the option for a cash-based system, which sometimes is easier to account for But it's easier to manipulate a cash-based system as well So so that's the pros and cons we'll dive into that a little bit more later You can see more about it if you want to go to the publication for chapter 2 So what must I do if I disposed of business property during the year now business property? We're not talking about inventory if you're selling inventory or services or something That's what happens during the normal course of business But what if I sold a piece of machinery a forklift or something like that business property? What then then you've got to deal with the that kind of sale Transaction of a fixed asset or something like that and we may look at that later And if you want to jump to that you can look at chapter 3. What kind of business income do I have to report on my tax return? so obviously Income is basically bad for taxes, right? So the IRS wants to say that you have to report all income unless there's an exception Provided by the IRS So are there any exceptions that we don't have to include an income and then which kind of things do I have to include an income on? The schedule C versus income possibly elsewhere on the tax return Are there any benefits to have it reported on the schedule C versus some somewhere else and so on and so forth? You can jump to chapter 5 if you want to read up on that We might discuss that more later. What kinds of business expense do I deduct on my tax return? This is obviously the big one because we have in essence an income statement for the schedule C income is bad for taxes Expenses business deductions are good for taxes. What kind of things can I deduct? Many of them are going to be straightforward Obviously the things that you consumed in order to generate revenue are the things you would naturally expect to be deductible in an Income tax type system and the schedule C makes a lot more sense from that perspective than all the other deductions Schedule A weird. Why do I get to deduct mortgage interest? I don't know. That's what the law says. Why that's just what the law says Why do I get to deduct? Why do I get to deduct property taxes and stuff? These are not Business expenses that I needed to expend to generate revenue. These are personal expenses So there's personal reasons the government's trying to influence our behavior for whatever reason they want or lobbyists did something or something To change the tax code But the business this when you talk about the schedule C it actually makes sense that you would tax people on The net income what people had to expend in order to generate the revenue Shouldn't be something, you know, you should should not tax people on their gross income You should tax them on the net income So then the question is what kind of those expenses can we include in which can't we include? Which is a huge topic in and of themselves and we'll go into that in more detail You can jump to chapter eight if you want to dive into that What kinds of expenses are not deductible as business expenses? So then of course the inverse what kind of expenses can't I deduct and obviously personal expenses start to get Things you can't deduct it gets messy when things are personal and business What if you traveled for business but the business happened to be at Disneyland or something like that then you've got That's where the muddy situation comes in again We'll talk about that later if you want to jump to it now in the in the publication Which you can find on the iris website and read up on it You can check that out on chapter eight. What happens if I have a business of a business loss Can I deduct it now note the IRS is saying hey, did you start a hot dog stand? Did you start a business of any kind? I saw you start that hot dog if you made any money Remember that we want part of it But obviously if you lost money if you had more expenses than revenue Then the iris doesn't want any part of your business, right? You would think that's their general standpoint They don't they want to they want to take on the the gains that you're gonna have They don't want to be responsible for the losses the risk in the business So can you deduct losses? Well, you could deduct them depends it kind of depends, right? Do you have income to deduct them against and then there's certain limitations and so on and so forth? The general idea would be that if you have a loss you can Understand the objective or the perception of the IRS would be we're skeptical of your losses We want income because we want to take part of your money We don't want to subsidize you for your losses unless you're like a giant Like like a natural natural energy company or something like that Then they'll throw money at you like right, but again for most people They they don't want to subsidize the losses so losses become messy then so we'll dive into losses more And future presentations you can take a look at chapter 9 if you so choose if you do have losses, of course Don't be afraid to take them as long as it's a legitimate business And then and then you do could get benefits from the losses many small businesses have losses when they first start Nothing to be ashamed of but just realized that the iris might be skeptical of losses And taking the losses so you want to make sure you have the evidence for it What are my rights as a taxpayer? So we're not gonna we may not dive too much into the into this this topic in our presentations But if you want to jump into it more detail chapter 11 on the publication and then where do I go if I? Need help with with federal tax matters I get you have some more resources that you could take a look at in the publication We might not dive into it so much on the presentations here But if you want to take a look at the publication that's in chapter 12