You enter all of those numbers. In your example, $20,000 income less $10,000 expenses = $10,000 taxable income.
You will use a Self-Employed version of TurboTax.
- Click on Federal down the left hand side of the screen.
- Click on Income & Expenses across the top of the screen.
- Under Your income and expenses you will find Self-employment income and expenses.
- Click on Start to the right.
The software will ask you questions about the nature of the business enterprise and guide you to enter both the income and expense amounts. The software will compute the net profit or loss of the business and report the information as the IRS requires. You will be taxed upon the net profit of the business.
The IRS states:
Before you can determine if you are subject to .... income tax, you must figure your net profit or net loss from your business.
You do this by subtracting your business expenses from your business income.
If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040 or 1040-SR.
If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040 or 1040-SR. But in some situations your loss is limited.
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