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Presentation/PPT
27/08/2022
Davy Jones needs to file taxes for his business and provides the following information.
Using your Tax Guide, you determine you’re going to be required to prep 1040 Schedule C Profit or Loss form a Business and 1040 Schedule SE Self Employment Tax for Jones’ Sole Proprietorship.
Davy Jones’ Nautical Tours is owned and operated as a Sole proprietorship by David K. Jones (SSN 000-00-0000)
Principal Business or Professional Activity Code; 114110
Principal business; Charter fishing tours
Employer Identification Number 867530950
Business address
1008 North Harbor Drive
San Diego, CA 92103
Home address
8700 Lake Murray Blvd #2
San Diego, 92119
Wages consist of $25,000 paid to one employee and $15,000 to another
Depreciation expense; Jones owns a fishing boat, The Jolly Roger, which he purchased for $850,000. The depreciation on the income statement is book depreciation and will differ from what is actually used on Line 13 Depreciation of form 1040 Schedule C.
The boat is depreciated using the Modified Accelerated Cost Recovery System (MACRS), half year convention, is in its 4th year of service and the 10-year recovery period is used.
Utilize Publication 946 How to Depreciate Property to calculate the correct depreciation amount to enter on the 1040 Schedule C. Locate Table A1 in the Appendix to calculate the tax-deductible depreciation.
Interest expense is interest paid on the loan for the boat
Insurance payments were made to cover liability for guests and for the boat
Payroll taxes; Federal Insurance Contributions Act (FICA); Social Security and Medicare payments made on the behalf of employees
Federal Insurance Contributions Act (FUTA) made on behalf of employees
Travel was purely for business purposes
Parking fines are tickets Jones received for parking illegally
Lease expense was paid to Honda Motors for his mother’s car lease, who is not involved in the business in any way
Davy Jones’ Nautical Tours 2016 Income Statement
Revenue
$ 400,950.00
Wages
$ 40,000.00
FICA
$ 3,060.00
FUTA
$ 85.00
Depreciation
$ 85,000.00
Interest
$ 43,900.00
Advertising
$ 6,350.00
Supplies
$ 23,795.00
Legal fees
$ 6,940.00
Insurance
$ 26,700.00
Boat slip rental
$ 33,010.00
Travel
$ 6,250.00
Office expense
$ 7,940.00
Parking fines
$ 1,350.00
Lease expense
$ 3,650.00
Net Profit
$ 112,920.00
Assignment Guidelines
To prepare the Sole Proprietorship’s tax return, complete the following steps:
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