Out of Scope:
- Not materially participating in the business
- Expenses exceed income (net business loss)
- 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
- 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. 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)
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.
- 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.
- Which trips are deductible? See the travel map.
- Actual expenses should include depreciation and are thus OUT OF SCOPE.