Out of Scope:
- Not materially participating in the business
- Expenses exceed income (net business loss)
- Expense for contract labor
- Expenses over $25,000
- Actual expense calculation for car/truck use
- Hobby or Not-for-profit activity
- Anything involving depreciation, depletion or amortization
- Returns and allowances
- Cost of goods sold
- Casualty losses
- Vehicle rental or lease expenses of more than 30 days
- Schedule C > Income > Other income
- Any bartering transactions
- Installment sales income (Form 6252)
- Business had inventory during the year
- Used other than cash method of accounting (i.e., accrual method)
- Expenses for employees
- Business requires filing of any Form 1099
- Business use of home (including Simplified Home Office Deduction)
- Has prior-year unallowed passive activity losses
- Receipt of credit card (or similar) payments that are not all income
- General Business Credit (Form 3800)
- Medical expense income adjustment on Form 1040
- Self-employed health coverage deductions for the ACA premium tax credit (new in 2014)
Is it a business?
An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. For further discussion and examples, go here.
To report income from a nonbusiness activity, use Form 1040, line 21. (i.e. Federal Section > Income > Other Income > Other Inc. Not Reported elsewhere TS page)
If the taxpayer received a 1099-MISC with an amount in Box 7 (Nonemployee compensation) and it is not self-employment, then enter the Box 7 amount as Box 3 (Other income) instead.
Tax Slayer entry:
Federal Section > Income > Profit or Loss From A Business
Basic Information About Your Business
- You can use the Business Activity Code link provided by Tax Slayer or the Business Code tool.
- Include the amounts from Forms 1099-K in with other gross receipts on line 1.
- Any adjustment to amount on Form 1099-K is OUT OF SCOPE .
- If the taxpayer received a 1099-MISC with an amount in box 7 (non-employee compensation) for care of a family member, it is reported as self-employment income only if the taxpayer is engaged in a care-giving trade. If not, it is reported as Other Income on 1040 line 21.
- If engaged in a care-giving trade, it may be deducted as a business expense unless it is for care of more than 5 adults or 10 children.
Drivers will receive one of more of the following documents:
- Box 1a of the 1099-K is entered on line 1 of the SCH C – there is no 1099-K form in TaxSlayer.
- 1099- MISC for payments they received from the company for referring new drivers.
- Year End Statement/Tax Summary. This shows income and expenses assessed or deducted by Uber/Lyft. Make sure it matches the 1099-K and/or 1099-MISC.
Drivers probably have other expenses they can deduct on their SCH C, for example:
- Bottled water, snacks and amenities for customers
- Mobile phone expenses used for business
- Mileage while driving around waiting for a customer (Uber/Lyft only report the mileage on their statements while a customer was in the car)
- Business taxes and licenses
- Out-of-pocket city and airport fees
- Out-of-pocket freeway, highway, and bridge tolls
- Electronic toll transponder
- Office supplies
- All allowable business expenses must be claimed.
- We cannot adjust business expenses to put the return in-scope or to maximize EIC or other benefits.
- Clothing must be unique for the business (special protective or identity clothing)
- Expenses that don’t fit a provided category can be enumerated in the Other Expenses TS page.
- If you worked for someone else as an employee, expenses go on Schedule A (Federal Section > Deductions > Itemized Deductions > Unreimbursed Employee Business Expense)
Car and Truck Expenses:
- We can prepare returns using the standard mileage rate only.
- And, the business portion of the ownership tax and car loan payment interest can be deducted on Schedule C. (The personal use portion of ownership tax can be deducted on Schedule A but not the interest.)
- Which trips are deductible? See the travel map.
- Actual expenses should include depreciation and are thus OUT OF SCOPE .