SCHEDULE C AUDIT RISKS

Transcription

1 7/15/2017 SCHEDULE C AUDIT RISKS C. FORREST DAVIS, E.A. A LOOK AT TAX RETURNS (2014) 148.6M individual returns 63.7M Form 1040A and EZ 84.9M Form M Schedule C or C-EZ 22.6M Schedule C 5.0M Sch C-EZ 1 in 5 returns have a Sch/C or C-EZ 1 in 's have a Sch/C or C-EZ C. Forrest Davis, EA 2 CHANCES OF AN AUDIT (2016) 64% OF SCH/C RETURNS ALSO HAD EIC Overall individual returns: 1 in 143 No C/E/F/2106: 1 in 427 Sch/C without EIC: 1 in 86 Sch/C with EIC: 1 in 66 The number of audits for Sch/C less than $25K with EIC: 407,724 Outnumbered 12:1 Audits for Sch/C over $100K: 33,065 C. Forrest Davis, EA 3 C. Forrest Davis, EA 4 1

2 7/15/2017 LITTLE AND BIG AUDITS HOW IRS SELECTS FOR A SCH/C AUDIT Mismatches: CP2000 DIFF score Correspondence audits: 71% Average additional tax: $6,622 Major questions: office/field audit Field audits: 29% Average additional tax: $18,977 LOU (large or unusual items) Loss High revenues Cash Transaction Reports (CTR) C. Forrest Davis, EA 5 C. Forrest Davis, EA 6 SCHEDULE C RED FLAGS LET'S LOOK AT SOME TAX RETURNS... Unreported 1099-MISC What could be a problem here? 2106 expenses on Sch/C Personal expenses on Sch/C No income Sch/C Owner wages High travel or M&E expenses Home office High COGS C. Forrest Davis, EA 7 C. Forrest Davis, EA 8 2

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4 Department of the Treasury Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2016 OMB No IRS Use Only Do not write or staple in this space. For the year Jan. 1-Dec. 31, 2016, or other tax year beginning, ending See separate instructions. Form Your first name and initial If a joint return, spouse's first name and initial Last name Last name Home address (number and street). If you have a P.O. box, see instructions. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Filing Status Check only one box. Exemptions If more than four dependents, see instructions and check here 1 Single 2 Married filing jointly (even if only one had income) 3 Married filing separately. Enter spouse's SSN above Apt. no. Your social security number Joe Taxpayer Spouse's social security number Jan Taxpayer No St Dirtville, NV Foreign country name Foreign province/state/county Foreign postal code X Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child's name here. Make sure the SSN(s) above and on line 6c are correct. Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. You Spouse and full name here. 5 Qualifying widow(er) with dependent child 6a X Yourself. If someone can claim you as a dependent, do not check box 6a Boxes checked b Spouse } on 6a and 6b c Dependents: (4) X if child No. of children (2) Dependent's (3) Dependent's under age 17 on 6c who: social security number relationship to you qualifying for lived with you (1) First name Last name child tax credit did not live with (see instr.) you due to divorce or separation (see instructions) 4 Presidential Election Campaign X 2 Dependents on 6c not entered above Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions. Adjusted Gross Income d Total number of exemptions claimed Wages, salaries, tips, etc. Attach Form(s) W a Taxable interest. Attach Schedule B if required a b Tax-exempt interest. Do not include on line 8a b 9a Ordinary dividends. Attach Schedule B if required a b Qualified dividends b 10 Taxable refunds, credits, or offsets of state and local income taxes Alimony received Business income or (loss). Attach Schedule C or C-EZ Capital gain or (loss). Attach Schedule D if required. If not required, check here Other gains or (losses). Attach Form a IRA distributions a b Taxable amount b 16a Pensions and annuities.. 16a b Taxable amount b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or (loss). Attach Schedule F Unemployment compensation a Social security benefits.. 20a b Taxable amount b Combine the amounts in the far right column for lines 7 through 21. This is your total income Educator expenses Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ Health savings account deduction. Attach Form Moving expenses. Attach Form Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings a Other income. List type and amount Alimony paid b Recipient's SSN 31a IRA deduction Student loan interest deduction Tuition and fees. Attach Form Domestic production activities deduction. Attach Form Add lines 23 through Subtract line 36 from line 22. This is your adjusted gross income For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. UYA Add numbers on lines above 2 90, , ,000. Form 1040 (2016)

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7 Department of the Treasury Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2016 OMB No IRS Use Only Do not write or staple in this space. For the year Jan. 1-Dec. 31, 2016, or other tax year beginning, ending See separate instructions. Form Your first name and initial If a joint return, spouse's first name and initial Last name Last name Home address (number and street). If you have a P.O. box, see instructions. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Filing Status Check only one box. Exemptions If more than four dependents, see instructions and check here Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions. Adjusted Gross Income 1 Single 2 Married filing jointly (even if only one had income) 3 Apt. no. Your social security number Joe Taxpayer Spouse's social security number Jan Taxpayer No St Dirtville, NV Foreign country name Foreign province/state/county Foreign postal code and full name here. 5 Qualifying widow(er) with dependent child 6a X Yourself. If someone can claim you as a dependent, do not check box 6a Boxes checked b Spouse } on 6a and 6b c Dependents: (4) X if child No. of children (2) Dependent's (3) Dependent's under age 17 on 6c who: social security number relationship to you qualifying for lived with you (1) First name Last name child tax credit did not live with (see instr.) you due to divorce or separation (see instructions) d Total number of exemptions claimed Add numbers on lines above 2 7 Wages, salaries, tips, etc. Attach Form(s) W ,000. 8a Taxable interest. Attach Schedule B if required a b Tax-exempt interest. Do not include on line 8a b 9a Ordinary dividends. Attach Schedule B if required a b Qualified dividends b 10 Taxable refunds, credits, or offsets of state and local income taxes Alimony received Business income or (loss). Attach Schedule C or C-EZ Capital gain or (loss). Attach Schedule D if required. If not required, check here Other gains or (losses). Attach Form a IRA distributions a b Taxable amount b 16a Pensions and annuities.. 16a b Taxable amount b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or (loss). Attach Schedule F Unemployment compensation a Social security benefits.. 20a b Taxable amount b 21 Other income. List type and amount Other income on F/1099-MISC , Combine the amounts in the far right column for lines 7 through 21. This is your total income , Educator expenses Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ Health savings account deduction. Attach Form Moving expenses. Attach Form Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings a X Married filing separately. Enter spouse's SSN above Alimony paid b Recipient's SSN 31a IRA deduction Student loan interest deduction Tuition and fees. Attach Form Domestic production activities deduction. Attach Form Add lines 23 through Subtract line 36 from line 22. This is your adjusted gross income For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. UYA 4 Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child's name here. Make sure the SSN(s) above and on line 6c are correct. Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. You Spouse X Dependents on 6c not entered above ,186. Form 1040 (2016)

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9 TurboTax interview for non-recurring income

10 Triggers F/8919 SPIFF is not subject to SE tax IRS Pub 3402

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13 Form 1040 Department of the Treasury Internal Revenue Service (99) OMB No U.S. Individual Income Tax Return 2011 IRS Use Only Do not write or staple in this space. For the year Jan. 1 Dec. 31, 2011, or other tax year beginning, 2011, ending, 20 See separate instructions. Your first name and initial Last name Your social security number If a joint return, spouse s first name and initial Last name Spouse s social security number Home address (number and street). If you have a P.O. box, see instructions. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Apt. no. Foreign country name Foreign province/county Foreign postal code Filing Status Check only one box. Exemptions If more than four dependents, see instructions and check here Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions. Enclose, but do not attach, any payment. Also, please use Form 1040-V. Adjusted Gross Income 1 Single 2 Married filing jointly (even if only one had income) 3 Married filing separately. Enter spouse s SSN above and full name here. Make sure the SSN(s) above and on line 6c are correct. Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. You Spouse 4 Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child s name here. 5 Qualifying widow(er) with dependent child 6a Yourself. If someone can claim you as a dependent, do not check box 6a..... } Boxes checked on 6a and 6b b Spouse c Dependents: (1) First name Last name (2) Dependent s social security number (3) Dependent s relationship to you Daughter Son Son (4) if child under age 17 qualifying for child tax credit (see instructions) d Total number of exemptions claimed Wages, salaries, tips, etc. Attach Form(s) W a Taxable interest. Attach Schedule B if required a b Tax-exempt interest. Do not include on line 8a... 8b 9 a Ordinary dividends. Attach Schedule B if required a b Qualified dividends b 10 Taxable refunds, credits, or offsets of state and local income taxes Alimony received Business income or (loss). Attach Schedule C or C-EZ Capital gain or (loss). Attach Schedule D if required. If not required, check here Other gains or (losses). Attach Form a IRA distributions. 15a b Taxable amount... 15b 16 a Pensions and annuities 16a b Taxable amount... 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or (loss). Attach Schedule F Unemployment compensation a Social security benefits 20a b Taxable amount... 20b 21 Other income. List type and amount Combine the amounts in the far right column for lines 7 through 21. This is your total income Educator expenses Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ Health savings account deduction. Attach Form Moving expenses. Attach Form Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings a Alimony paid b Recipient s SSN 31a 32 IRA deduction Student loan interest deduction Tuition and fees. Attach Form Domestic production activities deduction. Attach Form , Add lines 23 through Subtract line 36 from line 22. This is your adjusted gross income No. of children on 6c who: lived with you did not live with you due to divorce or separation (see instructions) Dependents on 6c not entered above Add numbers on lines above 82, , , , , ,475. For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. BAA REV 02/22/12 TTW Form 1040 (2011) 2 3 5

14 SCHEDULE C (Form 1040) Department of the Treasury Internal Revenue Service (99) Name of proprietor Profit or Loss From Business (Sole Proprietorship) For information on Schedule C and its instructions, go to Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form OMB No Attachment Sequence No. 09 Social security number (SSN) A Principal business or profession, including product or service (see instructions) B Enter code from instructions restaurant C E Business name. If no separate business name, leave blank. d/b/a Business address (including suite or room no.) 5 American Legion Place City, town or post office, state, and ZIP code Greenfield, IN F Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you materially participate in the operation of this business during 2011? If No, see instructions for limit on losses. Yes No H If you started or acquired this business during 2011, check here I Did you make any payments in 2011 that would require you to file Form(s) 1099? (see instructions) Yes No J If "Yes," did you or will you file all required Forms 1099? Yes No Part I Income 1 a Merchant card and third party payments. For 2011, enter a 0. b Gross receipts or sales not entered on line 1a (see instructions).. 1b c Income reported to you on Form W-2 if the Statutory Employee box on that form was checked. Caution. See instr. before completing this line d Total gross receipts. Add lines 1a through 1c d 2 Returns and allowances plus any other adjustments (see instructions) Subtract line 2 from line 1d Cost of goods sold (from line 42) Gross profit. Subtract line 4 from line Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) Gross income. Add lines 5 and Part II Expenses Enter expenses for business use of your home only on line Advertising Car and truck expenses (see instructions) Commissions and fees Contract labor (see instructions) Depletion Depreciation and section 179 expense deduction (not included in Part III) (see instructions) Employee benefit programs (other than on line 19) Insurance (other than health) Interest: a Mortgage (paid to banks, etc.) 16a b Other b 17 Legal and professional services 17 28,440. 1c 18 Office expense (see instructions) Pension and profit-sharing plans Rent or lease (see instructions): a Vehicles, machinery, and equipment 20a b Other business property... 20b 21 Repairs and maintenance Supplies (not included in Part III) Taxes and licenses Travel, meals, and entertainment: a Travel a b Deductible meals and entertainment (see instructions). 24b 25 Utilities Wages (less employment credits) a Other expenses (from line 48).. 27a b Reserved for future use... 27b 28 Total expenses before expenses for business use of home. Add lines 8 through 27a Tentative profit or (loss). Subtract line 28 from line , , Expenses for business use of your home. Attach Form Do not report such expenses elsewhere Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. If you entered an amount on line 1c, see instr. Estates and trusts, enter on Form 1041, line 3. } 31-28,440. If a loss, you must go to line If you have a loss, check the box that describes your investment in this activity (see instructions). } If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and on Schedule SE, line 2. If you entered an amount on line 1c, see the instructions for line a All investment is at risk. Estates and trusts, enter on Form 1041, line 3. 32b Some investment is not at risk. If you checked 32b, you must attach Form Your loss may be limited. For Paperwork Reduction Act Notice, see your tax return instructions. BAA REV 01/11/12 TTW Schedule C (Form 1040) 2011

15 Schedule C (Form 1040) 2011 Page 2 Part III Cost of Goods Sold (see instructions) 33 Method(s) used to value closing inventory: a Cost b Lower of cost or market c Other (attach explanation) 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If Yes, attach explanation Yes No 35 Inventory at beginning of year. If different from last year s closing inventory, attach explanation Purchases less cost of items withdrawn for personal use Cost of labor. Do not include any amounts paid to yourself Materials and supplies Other costs Add lines 35 through Inventory at end of year Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form When did you place your vehicle in service for business purposes? (month, day, year) 04/14/ Of the total number of miles you drove your vehicle during 2011, enter the number of miles you used your vehicle for: a Business 54,000 b Commuting (see instructions) c Other 0 45 Was your vehicle available for personal use during off-duty hours? Yes No 46 Do you (or your spouse) have another vehicle available for personal use? Yes No 47a Do you have evidence to support your deduction? Yes No b If Yes, is the evidence written? Yes No Part V Other Expenses. List below business expenses not included on lines 8 26 or line Total other expenses. Enter here and on line 27a REV 01/11/12 TTW Schedule C (Form 1040) 2011

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17 Department of the Treasury Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2016 OMB No IRS Use Only Do not write or staple in this space. For the year Jan. 1-Dec. 31, 2016, or other tax year beginning, ending See separate instructions. Form Your first name and initial If a joint return, spouse's first name and initial Last name Last name Home address (number and street). If you have a P.O. box, see instructions. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Filing Status Check only one box. Exemptions If more than four dependents, see instructions and check here 1 Single 2 Married filing jointly (even if only one had income) 3 Married filing separately. Enter spouse's SSN above Apt. no. Your social security number Joe Taxpayer Spouse's social security number Jan Taxpayer No St Dirtville, NV Foreign country name Foreign province/state/county Foreign postal code X Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child's name here. Make sure the SSN(s) above and on line 6c are correct. Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. You Spouse and full name here. 5 Qualifying widow(er) with dependent child 6a X Yourself. If someone can claim you as a dependent, do not check box 6a Boxes checked b Spouse } on 6a and 6b c Dependents: (4) X if child No. of children (2) Dependent's (3) Dependent's under age 17 on 6c who: social security number relationship to you qualifying for lived with you (1) First name Last name child tax credit did not live with (see instr.) you due to divorce or separation (see instructions) 4 Presidential Election Campaign X 2 Dependents on 6c not entered above Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions. Adjusted Gross Income d Total number of exemptions claimed Wages, salaries, tips, etc. Attach Form(s) W a Taxable interest. Attach Schedule B if required a b Tax-exempt interest. Do not include on line 8a b 9a Ordinary dividends. Attach Schedule B if required a b Qualified dividends b 10 Taxable refunds, credits, or offsets of state and local income taxes Alimony received Business income or (loss). Attach Schedule C or C-EZ Capital gain or (loss). Attach Schedule D if required. If not required, check here Other gains or (losses). Attach Form a IRA distributions a b Taxable amount b 16a Pensions and annuities.. 16a b Taxable amount b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or (loss). Attach Schedule F Unemployment compensation a Social security benefits.. 20a b Taxable amount b Combine the amounts in the far right column for lines 7 through 21. This is your total income Educator expenses Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ Health savings account deduction. Attach Form Moving expenses. Attach Form Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings a Other income. List type and amount Alimony paid b Recipient's SSN 31a IRA deduction Student loan interest deduction Tuition and fees. Attach Form Domestic production activities deduction. Attach Form Add lines 23 through Subtract line 36 from line 22. This is your adjusted gross income For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. UYA Add numbers on lines above 2 90, , , ,525. Form 1040 (2016)

18 Form 1040 (2016) Tax and Credits Standard Deduction for- People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions. All others: Single or Married filing separately, $6,300 Married filing jointly or Qualifying widow(er), $12,600 Head of household, $9, Amount from line 37 (adjusted gross income) a Check You were born before January 2, 1952, Blind. Total boxes if: { Spouse was born before January 2, 1952, Blind. } checked 39a 0 b If your spouse itemizes on a separate return or you were a dual-status alien, check here 40 Itemized deductions (from Schedule A) or your standard deduction (see left margin) Subtract line 40 from line Exemptions Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter (see instructions). Check if any from: a Form(s) 8814 b Form 4972 c Alternative minimum tax (see instructions). Attach Form Excess advance premium tax credit repayment. Attach Form Add lines 44, 45, and Foreign tax credit. Attach Form 1116 if required Credit for child and dependent care expenses. Attach Form Education credits from Form 8863, line Retirement savings contributions credit. Attach Form Child tax credit. Attach Schedule 8812, if required Residential energy credits. Attach Form c Add lines 48 through 54. These are your total credits Subtract line 55 from line 47. If line 55 is more than line 47, enter Self-employment tax. Attach Schedule SE Unreported social security and Medicare tax from Form: a 4137 b Other Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required 59 Taxes a Household employment taxes from Schedule H a b First-time homebuyer credit repayment. Attach Form 5405 if required b 61 Health care: individual responsibility (see instructions) Full-year coverage Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) Add lines 56 through 62. This is your total tax Payments 64 Federal income tax withheld from Forms W-2 and , estimated tax payments and amount applied from 2015 return 65 If you have a 66a Earned income credit (EIC) NO a qualifying child, attach b Nontaxable combat pay election.. 66b Schedule EIC. 67 Additional child tax credit. Attach Schedule American opportunity credit from Form 8863, line Net premium tax credit. Attach Form Amount paid with request for extension to file Excess social security and tier 1 RRTA tax withheld Credit for federal tax on fuels. Attach Form Refund Direct deposit? See instructions. Amount You Owe Third Party Designee Sign Here Joint return? See instr. Keep a copy for your records. Paid Preparer Use Only 73 a 2439b c d Add lines 64, 65, 66a, and 67 through 73. These are your total payments If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid a Amount of line 75 you want refunded to you. If Form 8888 is attached, check here a b Routing number c Type: Checking Savings 77 UYA Joe and Jan Taxpayer ,525. d Account number Amount of line 75 you want applied to your 2017 estimated tax 78 Amount you owe. Subtract line 74 from line 63. For details on how to pay, see instructions Estimated tax penalty (see instructions) Do you want to allow another person to discuss this return with the IRS (see instructions)? X Yes. Complete below. Designee's Phone Personal identification name no. number (PIN) Your signature Spouse's signature. If a joint return, both must sign. Print/Type preparer's name Firm's name Firm's address C Forrest Davis Preparer's signature Date Date Date 77 Your occupation Spouse's occupation Daytime phone number Page 2 If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Check if PTIN self-employed Davis Tax Services LLP Firm's EIN Phone no. 23, ,901. 8, ,801. 6,696. 6, ,696. 6, ,000. 8,304. 8,304. Grunt (702) Gruntess C Forrest DavisC Forrest Davis 07/15/2017 P E. Brott St. Tucson, AZ (520) No 0. Form 1040 (2016)

19 SCHEDULE C (Form 1040) Department of the Treasury Internal Revenue Service (99) Name of proprietor Profit or Loss From Business (Sole Proprietorship) Information about Schedule C and its separate instructions is at Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form OMB No Attachment Sequence No. 09 Social security number (SSN) A Principal business or profession, including product or service (see instructions) B Enter code from instructions C Business name. If no separate business name, leave blank Joe Taxpayer Reservations Agent, Telephone support D Employer ID number (EIN),(see instr.) E F Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you "materially participate" in the operation of this business during 2016? If "No," see instructions for limit on losses..... H If you started or acquired this business during 2016, check here I Did you make any payments in 2016 that would require you to file Form(s) 1099? (see instructions) J If "Yes," did you or will you file required Forms 1099? Part I Income 1 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the Statutory employee box on that form was checked Returns and allowances Subtract line 2 from line Cost of goods sold (from line 42) Gross profit. Subtract line 4 from line Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) Gross income. Add lines 5 and Part II Expenses. Enter expenses for business use of your home only on line Advertising Office expense (see instructions) Car and truck expenses (see 19 Pension and profit-sharing plans. 19 instructions) , Rent or lease (see instructions): 10 Commissions and fees a.. 20a 11 Contract labor (see instructions) 11 b Other business property b 12 Depletion Repairs and maintenance Depreciation and section Supplies (not included in Part III).. 22 expense deduction (not included 23 Taxes and licenses in Part III) (see instructions) Travel, meals, and entertainment: 14 Employee benefit programs a Travel a (other than on line 19) b Deductible meals and 15 Insurance (other than health).. 15 entertainment (see instructions). 24b 16 Interest: 25 Utilities a Mortgage (paid to banks, etc.). 16a 26 Wages (less employment credits). 26 b Other b 27a Other expenses (from line 48).. 27a 17 Legal and professional services. 17 b Reserved for future use b 28 Total expenses before expenses for business use of home. Add lines 8 through 27a Tentative profit or (loss). Subtract line 28 from line Business address (including suite or room no.) City, town or post office, state, and ZIP code Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32. If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, line 3. X Simplified method filers only: enter the total square footage of: (a) your home: and (b) the part of your home used for business:. Use the Simplified Method Worksheet in the instructions to figure the amount to enter on line If you checked 32b, you must attach Form Your loss may be limited. For Paperwork Reduction Act Notice, see the separate instructions. UYA 07/15/ :38:08PM } } a 32b Yes All investment is at risk. Some investment is not at risk. X Yes Yes No No No , , ,475. Schedule C (Form 1040) 2016

20 Schedule C (Form 1040) 2016 Part III Joe Taxpayer Cost of Goods Sold (see instructions) Page Method(s) used to value closing inventory: a Cost b Lower of cost or market c Other (attach explanation) Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation Yes No 35 Inventory at beginning of year. If different from last year's closing inventory, attach explanation Purchases less cost of items withdrawn for personal use Cost of labor. Do not include any amounts paid to yourself Materials and supplies Other costs Add lines 35 through Inventory at end of year Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form When did you place your vehicle in service for business purposes? (month, day, year) 01/01/ Of the total number of miles you drove your vehicle during 2016, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) c Other 45 Was your vehicle available for personal use during off-duty hours? X Yes No 46 Do you (or your spouse) have another vehicle available for personal use? X Yes No 47a Do you have evidence to support your deduction? X Yes No Other Expenses. List below business expenses not included on lines 8-26 or line 30. b If "Yes," is the evidence written? Part V X Yes No 48 Total other expenses. Enter here and on line 27a UYA /15/ :38:08PM Schedule C (Form 1040) 2016

21 SCHEDULE A (Form 1040) OMB No Information about Schedule A and its separate instructions is at Department of the Treasury Attachment Internal Revenue Service (99) Attach to Form Sequence No. 07 Name(s) shown on Form 1040 Medical and Dental Expenses Taxes You Paid Interest You Paid 1 2 Caution: Don't include expenses reimbursed or paid by others. Medical and dental expenses (see instructions) Multiply line 2 by 10% (0.10). But if either you or your spouse was born before January 2, 1952, multiply line 2 by 7.5% (0.075) instead. 3 8, Subtract line 3 from line 1. If line 3 is more than line 1, enter b General sales taxes Real estate taxes (see instructions) Personal property taxes Other taxes. List type and amount 8 9 Add lines 5 through Enter amount from Form 1040, line 38 Itemized Deductions State and local (check only one box): a Income taxes, or Home mortgage interest and points reported to you on Form 1098 Home mortgage interest not reported to you on Form If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address Your social security number Joe and Jan Taxpayer X 82,525. 3,000. 4, , ,300. Note. Your mortgage interest deduction may be limited (see instructions) Investment interest. Attach Form 4952 if required. (See instructions.) Add lines 10 through Gifts to 16 Gifts by cash or check. If you made any gift of $250 or Charity more, see instructions , Other than by cash or check. If any gift of $250 or more, If you made a gift and got a see instructions. You must attach Form 8283 if over $ benefit for it, 18 Carryover from prior year see instructions. 19 Add lines 16 through Casualty and Theft Losses 20 Casualty or theft loss(es). Attach Form (See instructions.) (See instructions.) Form , , Tax preparation fees Other expenses investment, safe deposit box, etc. List 24 type and amount Add lines 21 through Enter amount from Form 1040, line Multiply line 25 by 2% (0.02) , Subtract line 26 from line 24. If line 26 is more than line 24, enter Mortgage insurance premiums (see instructions) Unreimbursed employee expenses job travel, union dues, job education, etc. Attach Form 2106 or 2106-EZ if required. Other from list in instructions. List type and amount.. 82, , ,500. 2, ,824. Total 29 Is Form 1040, line 38, over $155,650? Itemized X No. Your deduction is not limited. Add the amounts in the far right column Deductions for lines 4 through 28. Also, enter this amount on Form 1040, line Yes. Your deduction may be limited. See the Itemized Deductions Worksheet in the instructions to figure the amount to enter. 30 If you elect to itemize deductions even though they are less than your standard deduction, check here For Paperwork Reduction Act Notice, see Form 1040 instructions. UYA ,624. Schedule A (Form 1040) 2016

22 Form 2106 Employee Business Expenses Attach to Form 1040 or Form 1040NR. Department of the Treasury Internal Revenue Service (99) Your name Occupation in which you incurred expenses OMB No Attachment Sequence No. 129 Social security number Joe Taxpayer Part I Employee Business Expenses and Reimbursements Column A Column B Step 1 Enter Your Expenses Other Than Meals and Entertainment Meals and Entertainment Vehicle expense from line 22 or line 29. (Rural mail carriers: See instructions.) Parking fees, tolls, and transportation, including train, bus, etc., that didn't involve overnight travel or commuting to and from work Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Don't include meals and entertainment Business expenses not included on lines 1 through 3. Don't include meals and entertainment , Meals and entertainment expenses (see instructions) Total expenses. In Column A, add lines 1 through 4 and enter the result. In Column B, enter the amount from line , Note. If you weren't reimbursed for any expenses in Step 1, skip line 7 and enter the amount from line 6 on line 8. Step 2 Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1 7 Enter reimbursements received from your employer that weren't reported to you in box 1 of Form W-2. Include any reimbursements reported under code "L" in box 12 of your Form W-2 (see instructions) Step 3 Figure Expenses To Deduct on Schedule A (Form 1040 or Form 1040NR) 8 Subtract line 7 from line 6. If zero or less, enter -0-. However, if line 7 is greater than line 6 in Column A, report the excess as income on Form 1040, line 7 (or on Form 1040NR, line 8) , Note. If both columns of line 8 are zero, you can't deduct employee business expenses. Stop here and attach Form 2106 to your return. 9 In Column A, enter the amount from line 8. In Column B, multiply line 8 by 50% (0.50). (Employees subject to Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred while away from home on business by 80% (0.80) instead of 50%. For details, see instructions.) , Add the amounts on line 9 of both columns and enter the total here. Also, enter the total on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). (Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and individuals with disabilities: See the instructions for special rules on where to enter the total.) 10 7,475. For Paperwork Reduction Act Notice, see your tax return instructions. Form 2106 (2016) UYA 07/15/ :38:08PM

23 Form 2106 (2016) Part II Vehicle Expenses Section A General Information (You must complete this section if you are claiming vehicle expenses.) (a) Vehicle 1 (b) Vehicle 2 11 Enter the date the vehicle was placed in service /01/ Total miles the vehicle was driven during miles 0 miles 13 Business miles included on line miles 0 miles 14 Percent of business use. Divide line 13 by line % % 15 Average daily roundtrip commuting distance miles 0 miles 16 Commuting miles included on line miles 0 miles 17 Other miles. Add lines 13 and 16 and subtract the total from line miles 0 miles 18 Was your vehicle available for personal use during off-duty hours? Yes No 19 Do you (or your spouse) have another vehicle available for personal use? Yes No 20 Do you have evidence to support your deduction? Yes No 21 If "Yes," is the evidence written? Yes No Section B Standard Mileage Rate (See the instructions for Part II to find out whether to complete this section or Section C.) 22 Multiply line 13 by 54 (0.54). Enter the result here and on line ,475. Section C Actual Expenses (a) Vehicle 1 (b) Vehicle 2 23 Gasoline, oil, repairs, vehicle insurance, etc a Vehicle rentals a b Inclusion amount (see instructions).. 24b c Subtract line 24b from line 24a. 24c Value of employer-provided vehicle (applies only if 100% of annual lease value was included on Form W-2 see instructions) Add lines 23, 24c, and Multiply line 26 by the percentage on line Depreciation (see instructions) Add lines 27 and 28. Enter total here and on line Section D Depreciation of Vehicles (a) Vehicle 1 (b) Vehicle 2 30 Enter cost or other basis (see instructions) Enter section 179 deduction and Multiply line 30 by line 14 (see instructions if you claimed the section 179 deduction or special allowance) Enter depreciation method and percentage (see instructions).. 33 % % 34 Multiply line 32 by the percentage on line 33 (see instructions) Add lines 31 and Enter the applicable limit explained in the line 36 instructions Multiply line 36 by the percentage on line Enter the smaller of line 35 or line 37. If you skipped lines 36 and 37, enter the amount from line 35. Also enter this amount on line 28 above UYA Joe Taxpayer Page Form 2106 (2016) 07/15/ :38:08PM

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28 SCHEDULE C (Form 1040) Department of the Treasury Internal Revenue Service (99) Name of proprietor Profit or Loss From Business (Sole Proprietorship) Information about Schedule C and its separate instructions is at Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form OMB No Attachment Sequence No. 09 Social security number (SSN) A Principal business or profession, including product or service (see instructions) B Enter code from instructions C Business name. If no separate business name, leave blank Joe Taxpayer Consultant, Joe's Consulting Service D Employer ID number (EIN),(see instr.) E F Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you "materially participate" in the operation of this business during 2016? If "No," see instructions for limit on losses..... H If you started or acquired this business during 2016, check here I Did you make any payments in 2016 that would require you to file Form(s) 1099? (see instructions) J If "Yes," did you or will you file required Forms 1099? Part I Income 1 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the Statutory employee box on that form was checked Returns and allowances Subtract line 2 from line Cost of goods sold (from line 42) Gross profit. Subtract line 4 from line Other income, including federal and state gasoline or fuel tax credit or refund (see instructions) Gross income. Add lines 5 and Part II Expenses. Enter expenses for business use of your home only on line Advertising Office expense (see instructions) Car and truck expenses (see 19 Pension and profit-sharing plans. 19 instructions) , Rent or lease (see instructions): 10 Commissions and fees a.. 20a 11 Contract labor (see instructions) 11 b Other business property b 12 Depletion Repairs and maintenance Depreciation and section Supplies (not included in Part III).. 22 expense deduction (not included 23 Taxes and licenses in Part III) (see instructions) Travel, meals, and entertainment: 14 Employee benefit programs a Travel a (other than on line 19) b Deductible meals and 15 Insurance (other than health) ,180. entertainment (see instructions). 24b 16 Interest: 25 Utilities a Mortgage (paid to banks, etc.). 16a 26 Wages (less employment credits). 26 b Other b 27a Other expenses (from line 48).. 27a 17 Legal and professional services ,000. b Reserved for future use b 28 Total expenses before expenses for business use of home. Add lines 8 through 27a Tentative profit or (loss). Subtract line 28 from line Business address (including suite or room no.) City, town or post office, state, and ZIP code Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both Form 1040, line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32. If you have a loss, check the box that describes your investment in this activity (see instructions). If you checked 32a, enter the loss on both Form 1040, line 12, (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, line 3. X Simplified method filers only: enter the total square footage of: (a) your home: and (b) the part of your home used for business:. Use the Simplified Method Worksheet in the instructions to figure the amount to enter on line If you checked 32b, you must attach Form Your loss may be limited. For Paperwork Reduction Act Notice, see the separate instructions. UYA 07/15/ :03:24PM } } a 32b Yes All investment is at risk. Some investment is not at risk. X Yes Yes No No No 1,386,486. 1,386,486. 1,386,486. 1,386,486. 5, , , , , , , , ,593. Schedule C (Form 1040) 2016