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Taxmap/pubs/p334-038.htm#TXMP0594195b Preparing the Return   for Stanley Price

Stanley Price owns and operates Stan's Barber Shop. He has been in business for 32 years. Stanley uses the cash method of accounting and files his return on a calendar year basis.

Taxmap/pubs/p334-038.htm#TXMP7be7f8b3 Schedule C-EZ

Schedule C-EZ

Stanley uses Schedule C-EZ to report the net profit from his business because he meets all of the requirements listed in Part I of the schedule. Stanley enters his name and social security number at the top of the schedule.

Taxmap/pubs/p334-038.htm#TXMP22a2179e Part I. General Information

Stanley fills out Part I as follows:

Taxmap/pubs/p334-038.htm#TXMP71fc690b Line A.

He enters his principal business.

Taxmap/pubs/p334-038.htm#TXMP2300d353 Line B.

He enters 812111, which is the 6-digit business code for a barber shop. He found the code on page C-8 of the instructions for Schedule C. Stanley locates the major business category that describes his business. He reads down the items under "Other Services" to find 812111—"Barber shops."

Taxmap/pubs/p334-038.htm#TXMP721d66b4 Line C.

He enters the name of his business—"Stan's Barber Shop."

Taxmap/pubs/p334-038.htm#TXMP3949d443 Line D.

Stanley leaves this line blank. He does not have an employer identification number (EIN) because he is not required to have one. For information about EINs, see Identification Numbers in chapter 1.

Taxmap/pubs/p334-038.htm#TXMP65f65f0c Line E.

He enters his business address.

Taxmap/pubs/p334-038.htm#TXMP2e2e0889 Part II. Figure Your Net Profit

Part II. Figure Your Net Profit

Stanley fills out Part II as follows:

Taxmap/pubs/p334-038.htm#TXMP46137420 Line 1. Gross receipts.

Stanley enters his gross receipts from cutting hair. They include the amounts he charged for haircuts and all the tips received from his customers. The total for the year was $29,500.

Taxmap/pubs/p334-038.htm#TXMP62797dc4 Line 2. Total expenses.

Stanley enters his expenses for the year. They total $5,000 and consist of the following.

• $545 for advertising in the local newspaper.
• $1,675 for supplies.
• $250 for business licenses.
• $2,530 for utilities (electricity and water).

Taxmap/pubs/p334-038.htm#TXMP2e3a17a4 Line 3. Net profit.

Stanley subtracts his total expenses ($5,000) from his gross receipts ($29,500) to get his net profit of $24,500. He enters his net profit here, on line 12 of Form 1040, and on line 2, Section A, of Schedule SE (Form 1040).

Taxmap/pubs/p334-038.htm#TXMP7977fb65 Part III. Information on Your Vehicle

Part III. Information on Your Vehicle

Stanley leaves this part blank because he is not deducting car or truck expenses.

Taxmap/pubs/p334-038.htm#TXMP5f474441 Schedule SE. Self-Employment Tax

Schedule SE. Self-Employment Tax

After Stanley prepares Schedule C-EZ, he fills out Schedule SE. He starts by entering his name and social security number at the top of the schedule. Then he reads the chart on page 1 of the schedule, which tells him he can use Section A–Short Schedule SE to figure his self-employment tax. He fills out the following lines in Section A.

Taxmap/pubs/p334-038.htm#TXMP5f59ca8a Lines 2 and 3.

He enters $24,500. This is his net profit from line 3 of Schedule C-EZ.

Taxmap/pubs/p334-038.htm#TXMP009c2a10 Line 4.

He multiplies $24,500 by 92.35% (.9235) to get his net earnings from self-employment ($22,626). This is his net profit subject to self-employment tax.

Taxmap/pubs/p334-038.htm#TXMP0e5014a9 Line 5.

Because the amount on line 4 is less than $87,900, Stanley multiplies the amount on line 4 ($22,626) by 15.3% (.153) to get his self-employment tax of $3,462. He enters that amount here and on line 57 of Form 1040.

Taxmap/pubs/p334-038.htm#TXMP216e8f31 Line 6.

He multiplies the amount on line 5 by 50% (.5) to get his deduction for one-half of self-employment tax of $1,731. He enters that amount here and on line 30 of Form 1040.

Taxmap/pubs/p334-038.htm#TXMP6c6cc4e0 Form 1040

F1040

Stanley fills out Form 1040 as follows:

Taxmap/pubs/p334-038.htm#TXMP25a78513 Name, address, and social security number.

Stanley enters his name, home address, and social security number.

Taxmap/pubs/p334-038.htm#TXMP06c3ab01 Presidential election campaign fund.

Stanley chooses to have $3 go to this fund. He checks the box next to "Yes."

Taxmap/pubs/p334-038.htm#TXMP181f7fdf Line 1.

Stanley checks the box on this line because he is filing as single.

Taxmap/pubs/p334-038.htm#TXMP1457195b Lines 6a and 6d.

Stanley claims an exemption for himself. He checks the box next to "Yourself" and enters "1" in the far right-hand entry space. He also enters "1" in the box on line 6d.

Taxmap/pubs/p334-038.htm#TXMP4ea41335 Line 8a.

Stanley enters $440 of taxable interest credited to his personal savings account for the year.

Taxmap/pubs/p334-038.htm#TXMP03dc1345 Line 12.

He enters his business net profit of $24,500 from line 3 of Schedule C-EZ.

Taxmap/pubs/p334-038.htm#TXMP0daa9f01 Line 22.

Stanley adds the amounts on lines 7 through 21 and enters the total, $24,940.

Taxmap/pubs/p334-038.htm#TXMP78df92b5 Line 25.

Stanley enters the $2,000 contribution he made for the year to his individual retirement arrangement (IRA). According to the Form 1040 instructions, he can deduct this amount.

Taxmap/pubs/p334-038.htm#TXMP4a72fd71 Line 30.

Stanley enters one-half of his self-employment tax ($1,731). He got this amount from line 6 in Section A of Schedule SE.

Taxmap/pubs/p334-038.htm#TXMP4fa7cbf5 Line 35.

Stanley adds the amounts on lines 23 through 34a and enters the total, $3,731.

Taxmap/pubs/p334-038.htm#TXMP37f13519 Line 36.

Stanley subtracts the amount on line 35 from the amount on line 22 to arrive at his adjusted gross income, $21,209. He also enters this amount on line 37.

Taxmap/pubs/p334-038.htm#TXMP7834099e Line 39.

He enters $4,850. This is the standard deduction for a single filer.

Taxmap/pubs/p334-038.htm#TXMP46fe8fa7 Line 40.

Stanley subtracts the amount on line 39 from the amount on line 37 to get $16,359.

Taxmap/pubs/p334-038.htm#TXMP1febaae9 Line 41.

He multiplies $3,100 by the number of exemptions claimed on line 6d to get his total exemptions, $3,100.

Taxmap/pubs/p334-038.htm#TXMP0eb32398 Line 42.

Stanley subtracts the amount on line 41 from the amount on line 40 to get his taxable income, $13,259.

Taxmap/pubs/p334-038.htm#TXMP5bb77249 Line 43.

Stanley uses the Tax Table in the Form 1040 instructions to figure his income tax. In the Tax Table he looks for the income bracket that includes $13,259. He finds the bracket for incomes of at least $13,250, but less than $13,300 and sees that the tax for a person filing as single is $1,634. He enters this amount here.

Taxmap/pubs/p334-038.htm#TXMP160a0c14 Lines 44 and 45.

Because he does not owe alternative minimum tax, he leaves line 44 blank and enters $1,634 on line 45.

Taxmap/pubs/p334-038.htm#TXMP033b2260 Lines 55 and 56.

Because Stanley does not have any of the credits listed on lines 46 through 54, he enters -0- on line 55 and $1,634 on line 56.

Taxmap/pubs/p334-038.htm#TXMP5b27600a Line 57.

He enters $3,462 from line 5 in Section A of Schedule SE.

Taxmap/pubs/p334-038.htm#TXMP0db701c1

Page 1 of Form 1040 for Stanley Price  

Taxmap/pubs/p334-038.htm#TXMP7ab03157

Page 2 of Form 1040 for Stanley Price  

Taxmap/pubs/p334-038.htm#TXMP1a77b8b4

Page 1 of Schedule C-EZ (Form 1040) for Stanley Price  

Taxmap/pubs/p334-038.htm#TXMP6d708826

Page 1 of Schedule SE (Form 1040) for Stanley Price  

Taxmap/pubs/p334-038.htm#TXMP371f3e47 Line 62.

Stanley adds the amounts on lines 56 through 61 and enters the total, $5,096.

Taxmap/pubs/p334-038.htm#TXMP51c19f36 Line 64.

He enters $6,000 of estimated tax payments he made for the year.

Taxmap/pubs/p334-038.htm#TXMP42f0ce47 Line 70.

He enters $6,000.

Taxmap/pubs/p334-038.htm#TXMP66149928 Lines 71 and 72a.

Stanley subtracts the amount on line 62 from the amount on line 70 to arrive at the amount he overpaid, $904. He wants this amount refunded to him so he enters it on line 72a. The IRS will send him a check for this amount provided he owes no other taxes, child support, spousal support, or certain other federal nontax debt. If Stanley wanted the refund deposited directly into his checking or savings account, he would have had to complete lines 72b, c, and d.

Taxmap/pubs/p334-038.htm#TXMP7d0b7ab7 Signing and assembling the return.

He checks the "No" block under Third Party Designee because he does not want to designate anyone, signs his name and enters the date signed, his occupation, and a daytime telephone number. He assembles his original Form 1040 and Schedules C-EZ and SE in that order. (See "Attachment Sequence No." in the upper right corner of each schedule or form.) Then he makes a copy of the return for his records. Finally, he mails it to the IRS.

Previous Page:  Publication 334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) - Sample Returns Next Page:  Publication 334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) - Your Rights as a Taxpayer Use     to find additional instances of index items.