 Income Tax 2021-2022, Business Expenses, Pension Plans. Get ready to get refunds to the max, diving into Income Tax 2021-2022. Loser Tax Software, you don't need Tax Software to follow along, but you might want to have the Form 1040, which you can find on the IRS website at irs.gov, irs.gov, starting point, the single filer, Adam Smith, living in Beverly Hills, 90210. We've got the Schedule C business flowing into line A to the page 1 of 1040. Let's follow that flow through by going to the Schedule C. Schedule C, which is, of course, the profit or loss from business, basically an income statement, 120,000 gross. We got the 20,000 expenses to start off with, the 100,000 on the net, then rolling in to the Schedule 1. Schedule 1, which is the additional income and adjustments to income, line number 3, line number 3, totaling up down below, line number 10, then rolling in to page 1 of the Form 1040, and now that's on the 100,000. We also have to deal with the Self-Employment Tax. You'll recall Self-Employment Tax is on the Schedule SE, Schedule SE, Self-Employment Tax, Social Security and Medicare, starting at the 14-129 that's rolling into the Form 1040. You can also see it on page 2 here. There's the 14-129 that rolls in then to the 1040, page number 2. There's the 14,000. It's not the Federal Income Tax, but the Social Security and Medicare, the Employment Tax. Then we also have half of that that's deductible above the line, and we can see that on the Schedule SE calculation, the half taken after 7,065, flowing into Schedule 1, and page number 2 of Schedule 1, number 15. That then is flowing in to the first page of the Form 1040, line number 10. So we got the 100,000 minus the 7,065, Adjusted Gross Income 92935. We got the 12,550 on the Standard Deduction. We also have the Qualified Business Income Deduction, Form 8995. I'm letting the Saltsward do that calculation at this point in time. I'm at the 64308, 64308. We can mirror that in our Excel worksheet, where we have the 100,000 pulling in from the Schedule SE, Schedule SE 120 minus the 20 gives us the 100. That pulls in to the Form 1040 or the first page of the formula. We then have the tax that's calculated on it, the Added Tax, that's the Self-Employment Tax, which is over here on the Additional Tax. We got our calculation for it coming out to that 14-130, the 14-130, then pulling in here. Half of that is the above-the-line deduction, Adjustments to Income, in other words, pulling into this Schedule or coming from this Schedule. That's not the one, this Schedule. There it is, 7,065. That pulls in to our formula. There that is. There's the 92935, matching then what we have on our tax return, 12,550 for the standard deduction that we have here as well. We're pulling in the Qualified Business Income deduction from the return to get to the 64308, 64308 page two doing the Federal Income Tax Calculation for us for the Progressive Tax System, 9,900, 9,900 there, and then the 14-130 to get to the 24-130, there's the 24, I'm sorry, the 24-30, the 24-29, which is a dollar off due to rounding. Let's get rid of this 150. That's not part of our starting point. That's not part of our thing here. That's an old problem stuff. So let's go back on over. That's our starting point. Now if I go back on over, let's say we had some kind of retirement plan that we set up. We can go into the Schedule C, and we can see then on the Schedule C that we have line number 19 here, Pension and Profit Sharing Plans. So that would be the most straightforward kind of data input. So if we had a SEP or a Simple or a Qualified Plans, then we can typically take the deduction here. You can deduct contributions you make to the plan for your employees on line 19 of the Schedule. So if I jump in over there, then we're going to say Contributions Made. Let's just say 10,000 on the Contributions, and then jump back on over, and there is that. So that's fairly straightforward now. But however, we might set this up and say, if you are a sole proprietorship as we are here and you deduct contributions you make to the plan for yourself, that goes on line 16 of Schedule 1. So that means that, and that's part of the reason that of course many people are going to set up, say a Simple or a SEP. They're basically saying, hey, if I was an employee working for a business, I would have access to generally a 401k plan if it was a large company, because that's a big benefit that they often offer, and I would get to put more money into that plan and possibly have a matching thing and everything with it. If I'm a sole proprietorship, then if I don't have anything set up, I only have the IRA to contribute into. And the problem with the IRA or one problem is that it has a limited amount. I want to put more money in than the IRA will let me put in. Usually the contribution limits are much higher for some kind of plan. I don't want to set up a 401k plan possibly for my business because it's too complex to set up. The administration work is too complex, so possibly I set up a SEP or a Simple, mainly primarily might be your first thought for a small business, so that I can put more money into it. And so then you make your decision on the SEP and the Simple possibly for that, and so that I could possibly give benefits to the employees as well so they can have more that they can put in than possibly under just an IRA. And then we can choose which plan like a SEP or a Simple would be best for us and then try to figure out how much we're going to be able to put money into the plan. So once we figure that out, which you want to then think about how you're going to set up the plan, when do I have to put in the contribution? Some plans like a SEP possibly you might have time even after the year end, which gives you a little bit more time to do tax planning and put the contribution in. So when do you have to put the contribution in? And then how do you actually do it logistically? Well, then we could finally get to this component. You could go to the Schedule 1, Page Number 2, and we're looking for the contributions to the plan, which is 19, which is going to be line 16. So 16, so whatever our contribution is, we can then put that component here. And I'm going to go to, let's say it was a, I'm going with a SEP here. Now you can then use the software to kind of figure out how much you can put in. And this is what's kind of nice. Like if you could set up your plan so that you can then determine how much you made because that's often going to be one of the limits in terms of calculating how much you can put into the plan, then kind of like with an IRA, you would have the capacity to do that last-minute planning to see how much you could put in. So if I was to say in software, say I want to max out the plan by putting a 1 here, then it'll basically put the maximum amount of the deductible amount here, which you could see is much higher than the IRA. And that's going to be, again, one of the big points for small businesses oftentimes to get themselves access to higher contributions, as well as benefiting any employees as well. So then if we add that up, that's going to add up to the 2386. We're going to pull that over to the first page of the Form 1040. So now we've got the 90,000, the 2386 here to get us to the gross income of the 66914, the 66914. If we were to mirror that on our software over here, we could say, okay, the contribution we made to the Schedule C fairly straightforward. We put whatever else the contribution was, and that was 10,000. And that's going to adjust our Schedule C income to the 90,000 pulling over here. And then our contribution that we made to our portion of the plan is an adjustment to income, which we could say we got student loans. We got all this stuff. Let's add another, insert another, and we put in, what did we call it here? What's it called? What's it called? What's it called? It's called self-employment, self-employed, SEP, simple. Let's call it that. Self-employed. Oh, I have that somewhere. It's already up there. Self-employed, SEP and simple is already there somewhere. So, and I said that we put that in at the 16728. 16728. 16728. Roger that. Copy out. Going on to page one again of the Form 1040, I mean. So now we've got the 66914 for the A to the G to the I. Adjusted gross income. Otherwise, 66914. And so that looks good. And then we've got the new business credit, 10873. I'm going to put here 10873 to get to the 43491. 43491, 43491. Page two, calculate in the tax then at the 5313, 5313. We're going to say this is 5313. And our calculation of the self-employment, is that calculating properly? It is. Roger that. Roger out. 101829. 1830 off by a dollar. That is okay. That is okay. So that's going to be the general ID. Now you might, if when you first kind of set this thing up, you could have that qualified credit as well. And that credit is on form 8881, I believe. So you can look at the instructions for more detail on this, but it's a credit for small employer pension plan, startup costs, and auto enrollment. You may also be able to claim a tax credit. If you begin a new qualified defined benefit or defined contribution plan, including a 401k, a simple plan or a SEP, the cost equals 50% of the cost to set up the administer, the plan and educate employees about the plan up to a maximum of $500 per year for each of the first three years of the plan. So qualified startup costs, we have to determine the startup costs. And if I just basically put up the startup costs that were like 1000, let's say, or 10,000, that's kind of a lot for startup costs. Let's put 1000 in there. See what that, see what we get. It's going to cap it at the 500. So there is the 500 that is pulling over to then form 3800. So that's pulling over to form 380, general business credit. So the general business credit then, and we've got the 500 that is pulling over then to the form 1040. And we're going to go to page number two. And now we've got that $500 ultimately pulling in here from schedule number three. I should have gone to schedule number three. So there's schedule number three for the general business credit that's pulling into the form 1040 page number two. Remember, it's a credit, not a deduction. So you get kind of the more of a benefit. The full $500 being affected as opposed to a decrease in the income on that. So if you're setting up the plan, then you could take into consideration that as well. And you could take a look at more research on it by going into the instructions for form 8881 on the IRS website, irs.gov, irs.g, to the O, to the V, G-O-V.