Preparing Dwight's 2018 Schedule C and SE for Business Income Tax

This assignment involves preparing Dwight's 2018 tax forms, specifically Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax). Dwight, the owner of a beet pickling business taxed as a sole proprietorship, provided expense information, vehicle use details, and a Form 1099-MISC indicating his business income. The task requires completing lines 1-31 of Schedule C using the provided data, including expenses like accountant fees, supplies, meals, entertainment, and personal property taxes. Vehicle expenses are calculated using the standard mileage rate. Subsequently, the assignment involves preparing Schedule SE, Section B, Part I, lines 2-13, using the applicable amount from the completed Schedule C and Dwight's W-2 information. The solution demonstrates how to calculate self-employment tax, considering social security wages and other relevant factors. The assignment emphasizes understanding business income, expense deductions, and self-employment tax calculations for a sole proprietor.

SCHEDULE SE
(Form 1040)
Department of the Treasury
Internal Revenue Service (99)
Self-Employment Tax
▶ Go to www.irs.gov/ScheduleSE for instructions and the latest information.
▶ Attach to Form 1040 or Form 1040NR.
OMB No. 1545-0074
2018Attachment
Sequence No.17
Name of person with self-employment income (as shown on Form 1040 or Form 1040NR) Social security number of person
with self-employment income▶
Before you begin: To determine if you must file Schedule SE, see the instructions.
May I Use Short Schedule SE or Must I Use Long Schedule SE?
Note: Use this flowchart only if you must file Schedule SE. If unsure, see Who Must File Schedule SE in the instructions.
No
Did you receive wages or tips in 2018?
Yes
▼ ▼ ▼
Are you a minister, member of a religious order, or Christian
Science practitioner who received IRS approval not to be taxed
on earnings from these sources, but you owe self-employment
tax on other earnings?
Yes ▶
No
▼
Are you using one of the optional methods to figure your net
earnings (see instructions)? Yes ▶
No
▼
Did you receive church employee income (see instructions)
reported on Form W-2 of $108.28 or more?
Yes ▶
No
▼
You may use Short Schedule SE below
Was the total of your wages and tips subject to social security
or railroad retirement (tier 1) tax plus your net earnings from
self-employment more than $128,400?
Yes ▶
No
▼
Did you receive tips subject to social security or Medicare tax
that you didn't report to your employer?
Yes ▶
No
▼
No
◀ Did you report any wages on Form 8919, Uncollected Social
Security and Medicare Tax on Wages?
Yes ▶
▶ You must use Long Schedule SE on page 2
▼
Section A—Short Schedule SE. Caution: Read above to see if you can use Short Schedule SE.
1a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form
1065), box 14, code A .. . . . . . . . . . . . . . . . . . . . . . . 1a
b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve
Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH1b ( )
2 Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065),
box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1.
Ministers and members of religious orders, see instructions for types of income to report on
this line. See instructions for other income to report .. . . . . . . . . . . . . 2
3 Combine lines 1a, 1b, and 2 . . . . . . . . . . . . . . . . . . . . . 3
4 Multiply line 3 by 92.35% (0.9235). If less than $400, you don't owe self-employment tax; don't
file this schedule unless you have an amount on line 1b .. . . . . . . . . . . . ▶ 4
Note: If line 4 is less than $400 due to Conservation Reserve Program payments on line 1b,
see instructions.
5 Self-employment tax. If the amount on line 4 is:
• $128,400 or less, multiply line 4 by 15.3% (0.153). Enter the result here and on Schedule 4 (Form
1040), line 57, or Form 1040NR, line 55
• More than $128,400, multiply line 4 by 2.9% (0.029). Then, add $15,921.60 to the result.
Enter the total here and on Schedule 4 (Form 1040), line 57, or Form 1040NR, line 55. . 5
6 Deduction for one-half of self-employment tax.
Multiply line 5 by 50% (0.50). Enter the result here and on
Schedule 1 (Form 1040), line 27, or Form 1040NR, line 27. 6
For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11358Z Schedule SE (Form 1040) 2018
Dwight None-of-your-Business

Schedule SE (Form 1040) 2018 Attachment Sequence No.17 Page 2
Name of person with self-employment income (as shown on Form 1040 or Form 1040NR) Social security number of person
with self-employment income▶
Section B—Long Schedule SE
Part I Self-Employment Tax
Note: If your only income subject to self-employment tax is church employee income, see instructions. Also see instructions for the
definition of church employee income.
A If you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but you
had $400 or more of other net earnings from self-employment, check here and continue with Part I. . . . . . ▶
1a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065),
box 14, code A. Note: Skip lines 1a and 1b if you use the farm optional method (see instructions)1a
b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve
Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH1b ( )
2 Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065),
box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1.
Ministers and members of religious orders, see instructions for types of income to report on
this line. See instructions for other income to report. Note: Skip this line if you use the nonfarm
optional method (see instructions) .. . . . . . . . . . . . . . . . . . . 2
3 Combine lines 1a, 1b, and 2 .. . . . . . . . . . . . . . . . . . . . . 3
4 a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 34a
Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions.
b If you elect one or both of the optional methods, enter the total of lines 15 and 17 here. . 4b
c Combine lines 4a and 4b. If less than $400, stop; you don't owe self-employment tax.
Exception: If less than $400 and you had church employee income, enter -0- and continue▶ 4c
5 a Enter your church employee income from Form W-2. See
instructions for definition of church employee income. . . 5a
b Multiply line 5a by 92.35% (0.9235). If less than $100, enter -0-. . . . . . . . . . 5b
6 Add lines 4c and 5b . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Maximum amount of combined wages and self-employment earnings subject to social security
tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2018 .. . . . . 7
8 a Total social security wages and tips (total of boxes 3 and 7 on
Form(s) W-2) and railroad retirement (tier 1) compensation.
If $128,400 or more, skip lines 8b through 10, and go to line 118a
b Unreported tips subject to social security tax (from Form 4137, line 10)8b
c Wages subject to social security tax (from Form 8919, line 10)8c
d Add lines 8a, 8b, and 8c .. . . . . . . . . . . . . . . . . . . . . . 8d
9 Subtract line 8d from line 7. If zero or less, enter -0- here and on line 10 and go to line 11. ▶ 9
10 Multiply the smaller of line 6 or line 9 by 12.4% (0.124) .. . . . . . . . . . . . 10
11 Multiply line 6 by 2.9% (0.029). . . . . . . . . . . . . . . . . . . . . 11
12 Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 4 (Form 1040), line
57, or Form 1040NR, line 55. . . . . . . . . . . . . . . . . . . . . 12
13 Deduction for one-half of self-employment tax.
Multiply line 12 by 50% (0.50). Enter the result here and on
Schedule 1 (Form 1040), line 27, or Form 1040NR, line 27. 13
Part II Optional Methods To Figure Net Earnings (see instructions)
Farm Optional Method. You may use this method only if (a) your gross farm income1 wasn't more
than $7,920, or (b) your net farm profits2 were less than $5,717.
14 Maximum income for optional methods .. . . . . . . . . . . . . . . . . 14
15 Enter the smaller of: two-thirds (2/3) of gross farm income1 (not less than zero) or $5,280. Also
include this amount on line 4b above .. . . . . . . . . . . . . . . . . . 15
Nonfarm Optional Method. You may use this method only if (a) your net nonfarm profits3 were less than $5,717
and also less than 72.189% of your gross nonfarm income,4 and (b) you had net earnings from self-employment
of at least $400 in 2 of the prior 3 years. Caution: You may use this method no more than five times.
16 Subtract line 15 from line 14 .. . . . . . . . . . . . . . . . . . . . . 16
17 Enter the smaller of: two-thirds (2/3) of gross nonfarm income4 (not less than zero)or the
amount on line 16. Also include this amount on line 4b above .. . . . . . . . . . 17
1 From Sch. F, line 9, and Sch. K-1 (Form 1065), box 14, code B.
2 From Sch. F, line 34, and Sch. K-1 (Form 1065), box 14, code A—minus the
amount you would have entered on line 1b had you not used the optional
method.
3 From Sch. C, line 31; Sch. C-EZ, line 3; Sch. K-1 (Form 1065), box 14,code
A; and Sch. K-1 (Form 1065-B), box 9, code J1.
4 From Sch. C, line 7; Sch. C-EZ, line 1; Sch. K-1 (Form 1065), box 14, code
C; and Sch. K-1 (Form 1065-B), box 9, code J2.
Schedule SE (Form 1040) 2018
Dwight None-of-your-Business
2290 00
2290 00
2115 00
2115 00
0 00
2115 00
128,400 00
133,000 00
133,000 00
0 00
0 00
61 34
61 34
30 67
5,280 00