Self-employed sole proprietor with W2 income

Forum|Forum|6 years ago
August 8, 2020
5 replies
44 views

Let's consider a hypothetical tax environment I may end up in 2021 and try to find legit answers.

Household: Single, no dependents

Business type: Software services

Source of income:

C2C contract as a sole proprietorships
W2 employment, employer withheld taxes

Expected total gross income:

$180 000 from sole proprietorships business
$130 000 from W2 employment

Retirement total contributions:

a) $45 000 (25%) to SEP simple from sole proprietorships income

b) nothing from W2

Questions:

1. Does pass-though 20% deductible applicable for remaining taxable $135000 from business regardless W2 taxable $130000?

2. What's the difference between 157000 and 207000 thresholds for single when we are talking about qualification for pass-though 20% deductible?

3. Now let's add additional information. There is an accumulated $100 000 investment loss carried over from 2019. What is an additional deductible we can consider from both sources of income after 20% pass-through?

4. What should I keep an eye on to minimize tax withholdings for the given example?

Critter-3

Level 15

Which 2019 program did you use ? Online or Downloaded ? and which version ?

LookerAuthor

Level 2

Neither, I'm trying to understand outcomes if I end up in that situation

Critter-3

Level 15

This is way to complicated for this kind of forum ... what you really need to do is talk to a local tax pro to get educated on the federal/state implications of your situation. You could try using the Self Employed online program to do a few what if scenarios ... you will not be able to view anything more than the form 1040 without paying for the program ... just do NOT file it.

Or buy a downloaded Deluxe version (Basic if you don't need a state program) and what if till the cows come home ... you can buy the 2019 download rather cheap right now if you buy it thru a reputable reseller like office depot or walmart.

This is my mini version of a tutorial that should be in the downloaded program:

Always remember to shut off the auto update function once you have filed your returns and do not do any updates unless you have safeguarded the PDF & .taxfiles to a removable storage unit for safekeeping.

What is Forms Mode?

Forms Mode lets you view and make changes to your tax forms "behind the scenes."

If you're adventurous, you can even prepare your return in Forms Mode, but we don't recommend it. You may miss obscure credits and deductions you qualify for, and you may forget to report things that will come back and haunt you later.

Forms Mode is exclusively available in the TurboTax CD/Download software. It is not available in TurboTax Online.

Related Information:

If you want to play around with different figures and tax scenarios without affecting your original return you can ….

>>>In the TurboTax CD/Download software by creating a test copy:
1. Open your return in TurboTax.
2. From the File menu, choose Save As.
3. Give the copy a new name to distinguish it from the original (for example, by adding "Test" or "Example" to the file name).
4. Click Save. You are now safely working in the test copy and anything you do here will not affect the original.
https://ttlc.intuit.com/questions/1900642-how-to-make-a-test-copy-of-your-return

>> use the WHAT IF tool:
- Click Forms Icon (upper right of screen) or Ctrl 2 (forms view)
- Click on the Open Form Icon
- In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form
- You will see the worksheet on the right side of the screen; enter the information right into the form
- To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

It's always a good idea to make a backup copy of your tax data file, in case your original gets lost or corrupted. Here's how:

From the File menu in the upper-left corner of TurboTax, choose Save As (Windows) or Save (Mac).
Browse to where you want to save your backup.
- Tip: If you're saving to a portable device, save it to your computer first to prevent data corruption. Then, after completing Step 4, copy or move the backup file to your device.
In the File name field, enter a name that will distinguish it from the original tax file (for example, add "Backup" or "Copy" to the file name)
Click Save and then close TurboTax.
Restart TurboTax and open the backup copy to make sure it's not corrupted. If you get an error, delete the backup and repeat these steps.

If you make changes to your original tax return file, repeat these steps to ensure your original and backup copies are in-synch.