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Special Expenditures for Self-Employed Business Expenses?

Which of the following statements is correct and/or needs to be clarified?

Use the Special Expenditures screen:

- Only for personal expenditures. Do not use it for any business-related ones.

- If you are self-employed and not incorporated, then do list significant special expenditures.

This is the situation that triggered the question: I am a sole proprietor. I plan to pay cash for a car for business use, and then to depreciate the car.

A $25,000 (or more) cash payout is pretty significant, so it seems like I should:

- Enter the car purchase into ESPLanner.

- Ignore the fact that I will depreciate the car because those numbers are accounted for in Self-Employed Earnings (assuming that Self-Employed Earnings are supposed to be entered as net profits and not gross receipts).

Thank you in advance for clearing the cobwebs.

1

HI, THIS IS LARRY RESPONDING IN CAPS BELOW.

Which of the following statements is correct and/or needs to be clarified?

Use the Special Expenditures screen:

- Only for personal expenditures. Do not use it for any business-related ones.

NOT NECESSARILY. YOU CAN USE SPECIAL EXPENDITURES TO ENTER BUSINESS-RELATED EXPENSES IF YOU'D LIKE. YOU CAN ALSO NET THEM OUT FROM YOUR SELF-EMPLOYMENT INCOME IF THEY ARE TAX EXCLUDABLE AND YOU ARE SELF-EMPLOYED. SUPPOSE YOU AREN'T SELF-EMPLOYED AND A TEACHER AND NEED TO SPEND $500 A YEAR FOR SCHOOL SUPPLIES FOR YOUR STUDENTS AND CAN'T GET REIMBURSED BY THE SCHOOL. THESE EXPENSES CAN BE ENTERED AS NON-TAX RELATED SPECIAL EXPENDITURES.

- If you are self-employed and not incorporated, then do list significant special expenditures.

This is the situation that triggered the question: I am a sole proprietor. I plan to pay cash for a car for business use, and then to depreciate the car.

A $25,000 (or more) cash payout is pretty significant, so it seems like I should:

- Enter the car purchase into ESPLanner.
YES

- Ignore the fact that I will depreciate the car because those numbers are accounted for in Self-Employed Earnings (assuming that Self-Employed Earnings are supposed to be entered as net profits and not gross receipts).

NO. THIS ISN'T CORRECT. IF YOU CAN CALCULATE HOW MUCH DEPRECIATION YOU'LL HAVE EACH YEAR YOU CAN ENTER FOR EACH YEAR THAT'S YEAR'S DEPRECIATION AS A SPECIAL EXPENSE THAT IS EXCLUDABLE FROM AGI AS WELL AS A SPECIAL RECEIPT THAT IS NON-TAX RELATED. THIS DOUBLE ENTRY WILL GET THE TAXES RIGHT, BUT ELIMINATE ANY CASH FLOW AFFECTS. CALL ME AT 617 834-2148 IF THIS ISN'T CLEAR.

Thank you in advance for clearing the cobwebs.

2

Larry, thank you for your previous responses.

Similar to using your SSN statements to capture past earnings, when is it feasible to take numbers from past year(s) tax forms? (a few examples would be helpful)

If using data from tax forms is feasible, then maybe it would help lessen some confusion in this (or other areas)?

(Ponderingly Yours) Rose