 Income Tax 2021-2022, Software Example, Business Expenses, Insurance. Get ready to get refunds to the max, dive in into Income Tax 2021-2022. Well, assert tax software, you don't need tax software to follow along, but you might wanna have the form 1040, which you can find on the IRS website at irs.gov, irs.gov, starting point single, Fireler Adam Smith, living in Beverly Hills, 90210. We've got the Schedule C business flowing through to page one. Let's take a look at that flow-through process by going to the Schedule C. This is going to be then the Schedule C, profit or loss from the business. We're starting at the 120,000, gross 20,000 then for the expenses, giving us that 100,000, which is flowing through to the Schedule One, going on over to the Schedule One, which is called the Additional Income and Adjustments. There's the 100,000 line number three that is flowing then to page one of the form 1040. Here we are on the form 1040 line number eight. We're also gonna have the self-employment tax on the bottom line on that 100,000. That'll be on the Schedule SE. This is gonna be the self-employment tax Schedule SE, calculation the Social Security and Medicare, not the federal income tax. That's gonna be the 14129 that flows ultimately through to the 1040 page number two. And we see that amount here, 14129. Half of that is deductible, as you can also see on the Schedule SE. That's gonna be the 7065 that's gonna be flowing through to the Schedule One, the page number two. So there's the 7065 that flows through to these 1040 page number one in line 10 adjustments to get our AGI at the 92935, standard deduction, 12,550 for the single filer. We've got the 1677, letting the software do the calculation for the qualified business income. And then we've got the 64308 at the taxable income starting point. Going back on over to RXO worksheet to mirror that. We got the 100,000 coming from the Schedule SE, Schedule SE income statement bottom line, 100,000 pulling into page one of the 1040. We've got the added tax down here of the 14130 with the tax calculation in our additional tax, which our nice little formula, we did in a prior presentation, 14130, that pulling over to the first page of the 1040 here. We've got the above the line deduction, the 7065 adjustments to income calculated here, taking half of the self-employment tax. And there's the 92935. We see that on the 1040, 92935. We see the 1644, which I'm pulling from the software. That gets us to the 64308. So there's the 64308 page number two, calculating the tax at 9099900 to get us to the 2429. So there's the 9900 plus the self-employment tax to 2430 off by a dollar due to rounding. So if I go back on over to the software, we're going to the Schedule SE, we're looking at the different forms of insurance. And we saw that there's a whole bunch of different kinds of insurance, any kind of insurance that's of course, business related, so fire insurance, liability insurance, and so on that's basically clearly defined for the business would be something that would generally be deductible as ordinary and necessary might go somewhere like here online number 15. So any of that kind of insurance you would think would be deductible here. Let's just put 15,000 in insurance or let's put 1,500 insurance. And so that pulls in, that's going to be a fairly straightforward kind of deductible item. If it's clearly something that is insurance related to the business. Two kinds of things that you just want to keep in mind is you might have insurance on the car and that gets a little bit mixed up with regards to, one, where is it going to be deducted? And two, how are you deducting the auto expenses? So oftentimes you kind of group those up here with the car and truck kind of expenses and you might have a, if you have a bookkeeping system, be tempted to double them up. Sometimes they can get kind of doubled up so you record the insurance expense down here for the car and then you've also included it up here and or up here you use the mileage method for example. If you use the mileage method for the insurance then you don't get to deduct the insurance because it's kind of included in the calculation of the mileage method. So for example, if I went over to the deduction here which we talked about in a prior presentation so I'll do it a little bit more quickly. So if we go down and say that we're going to do the deduction for 2106 and just use an auto, I'm going to apply this to the schedule C and I'm going to say this is going to be a truck, a truck that we use placed in service. Let's say 010121, the mileage, let's say it was 10,000 miles and 10,000 miles. And so there we have it and then no commute and then the average. So let's say that we have the mileage method then is going to be used here. Let's actually make this 12,000 and 10,000 and the commute let's say was 500. Okay, so then if I go down and I say there's insurance that would assume to be auto insurance of $1,000 and I go back on up, then we've got the amount being calculated, the 5,600 here. If I go then to the worksheet for the vehicle that has been calculated, we can see we're basically using the mileage method. So we're taking the amount of business miles to 10,000 times the rate of 56, that's where they're getting that 5,600 and we're not pulling over the insurance. The insurance isn't being included when I pull it over here and that's because we're using the mileage method so the car insurance shouldn't be included. If I was to include it down here as well, I would be doubling up in a sense because I would be including it in the car by using the mileage method and then down here which would basically double it up. Now if I was using the actual method, if I went back on over and I won't enter the depreciation or anything like that but just let's just pretend that the actual or let's enter the depreciation down here that this came out to 12, this came out to let's say 8,000 here. So now I'm gonna use the actual method and obviously I would have to calculate the depreciation but I'm just gonna put it in there so we can see how the insurance would be added because the focus is on the insurance. So now we have the depreciation being taken here at the 8,000 which is still 80% of the depreciation we put in and now part of the insurance is also being put up top. So if I go into the vehicle calculation, we've got then the still, I'm still using this percentage method that's being allocated times the depreciation and times the 1,000. So that's how we're getting to the 8,33 of the insurance. So now I'm deducting the insurance but the insurance is being deducted due to the input in the software even though it's insurance it's being deducted under car and truck expenses. So that's one thing to just kind of keep in mind. Then you also might have a self-employed health insurance which is the other one that gets a little tricky. If I go into the schedule one page schedule one if we go into the schedule one page number two then we can see that we have this the self-employed health insurance here. So if you have subject to self-employment income SE then you might be able to take the self-employed health insurance deduction. The reason that one's a little bit confusing is because we wouldn't really take it on the schedule C here. It would be related in essence to the schedule C because that's the thing that's subject to the self-employment but then it would be reported as an above the line or adjustment to income. And you could dive into kind of the rules on that. There's some restrictions on it whether or not you're gonna be subject or whether or not you have the capacity to be on insurance through a job or possibly through a spouse's job. So it could have restrictions on it but just note that whenever you got the schedule C you're always gonna be asking or thinking about what's your health insurance situation and if your health insurance isn't through something like a work like another job, W2 or something like that then you may be able to deduct it but not typically here you'd be deducting it on the schedule one. So if I went back up here and then we had the health insurance. So I'm gonna say page two, the health insurance not that one right up top and jump into that. So I'm gonna say this is health insurance, premiums, not included elsewhere. Let's put the one two up top and then jump on back to our forms. There's the 1,200 if I go then to the 1040. Now you can see that would be included up here in the adjustments to income. Let's get rid of all these check marks. These are not necessary. So there they are. So usually the insurance is gonna be fairly straightforward. So just a quick recap. If it is insurance related to the business liability insurance for example, that's pretty straightforward that it's ordinary and necessary type of insurance whatever insurance is necessary for your business will of course depend on the type of business that you are in. And then you've got the auto insurance which you gotta think about what kind of method that you're gonna be using. And when you're looking at the bookkeeping versus your taxes to make sure that you have the proper categorization and that you're not double recording the insurance either by having them in two categories or by taking the mileage method and putting the insurance on top of that down here for example. And then you always wanna think about yourself your health insurance and think if you don't have access to health insurance elsewhere generally would be the and you have to have your own health insurance and you have the self-employment then you might be able to deduct that but it wouldn't typically be here on the schedule C but rather on the schedule one page two which are the adjustments to income which then flows through to the bottom line here 7,535 flows through to page one up top in the adjustments to income line number 10.