 Here we are in our example, Form 1040, populating it with LASERT tax software. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the Form 1040 related schedules and forms at the IRS website, irs.gov, irs.gov. Starting point as usual, we've got the single filer, Mr. Anderson, no dependence, W2 wages, 100,000 standard deduction at the 12,950, getting us to the taxable income, 87,050. We're mirroring that in our income tax formula, which we may or may not use this worksheet as we go forward, but here's the 100,000, there's the 12,950, there's the 87,050. We've relying the tax software to do the calculation. My calculations indicate that. For the tax, which is on page two of the Form 1040, 14774, 15,000 withheld gets us to the 226, which we're mirroring over here in our equation. Okay, that said, let's go on back and run the scenario where we're gonna have another situation where we have income from a business, income from the business. So let's just look at the differences. I'm gonna imagine a situation where we don't have any income as a W2 income anymore and we just have the income from the business and look at all the different changes that will happen, including the change we're focused on this time, which is the deductibility possibly of the health insurance. So let's see how that would work. I'm gonna go on over and say, let's remove the W2 income and let's just say that's gone. Let's just, we'll just delete it this way. Boom. And then we're gonna go into the Schedule C and say that we have then, I'll just populate the income side of things. Let's say it was gross income 120,000 and then we had expenses for advertising to 20,000 just to get some subtraction in there. So that should give us 100,000 of income pulling it over. And then we have the Schedule C. Now, obviously I didn't populate a lot of the other stuff to go through the Schedule C in detail. We'll talk about it later, but the general idea is it is an income statement in essence, income minus expenses. We could see some of the added kind of confusion just with regards to bookkeeping to implement or input the income statement into the system and a client's possible need for bookkeeping help just with that. Just also note that if you take on clients that have businesses, you're also gonna run into most likely the mileage method for the car, home use of the office and whatnot. So we'll dive into some more of this stuff when we get to the Schedule C stuff, but just be aware when you're trying to sort out what kind of clients you wanna deal with, business clients are gonna be a lot more complex. That gets us the 100,000 net income that pulls into the Schedule 1. As we would expect, there's the 100,000 for the additional deposit. Income and adjustments to income, which pulls into the 1040. So now instead of having the 100,000 up top, it is down here on the information that came from the Schedule 1. That kind of makes sense, but it doesn't stop there. The fund doesn't stop there. We also are gonna have to calculate the taxes, self-employment tax. So we talked about that, so we could see then here's the 14129. That's over and above the income tax, which usually we don't have to deal with when we're dealing with clients that have W2 income because they have the employer dealing with their social security and Medicare taxes. Here we have to calculate the employee and employer portion on the net income, which was in essence that 100,000, although it was just adjusted a little bit. And that goes then to 1040 page two. So we've got the tax calculated, but we also have this other tax of the 14129, which is another added issue. We also, as we saw in a prior presentation, get half of that tax, as we can see here, as a deduction, marrying what would happen on a corporate side of things where the employee pays half the tax, the employer pays half the tax, but the employer gets to deduct the items. And so we should get to deduct this half right here, but we can't deduct it on the schedule C because we have to get to the net income in order to calculate the tax. And that would be a circle reference. So they put it over here on the schedule one, page number two, and there's the half of the deductible portion of the self-employment tax. Now, on top of that, we talked about in a prior presentation, a calculation possibly of a SEP or simple as types of plans that could be set up for a sole proprietor. So that's another thing that will typically come up, if you deal with clients that have their own businesses, then you have issues with regards to, they don't have access to a 401K plan possibly from a W-2 employee, if this is their only business. So you might have to deal with possible planning to be able to set up a 401K, but that's usually more complex. So a simple plan like a SEP or a simple or something. And then you've got the health insurance situations. And so now the question is, if they don't have access to any other kind of health insurance, then you should be able to get a benefit, you would think for the health insurance here. And then your first thought would be that, well, shouldn't the health insurance be deducted on the schedule? Scheduled election. C, so that gets a little bit messy because we're not putting it on the schedule C over here. It's pulling over to the schedule one and you can kind of imagine why that might be the case, right? Cause if it was on the schedule C, then you'd get to deduct, you'd get to lower your income over here on the schedule C, which means you'd be paying less social security taxes. So the fact that they put the health insurance possibly on schedule one, isn't gonna have a benefit for your social security taxes, although it will have a benefit for your income taxes. So that's what we end up with.