So made around 290k as independent contractor which ended end August. Now got a normal job..
Calculated my SSA and Medicare taxes off that income
So took the max 63.5k as deduction for 401k (employee and employer) and assume can write off medical expenses until end August.
I understand i get a 20 pct business deduction as independent contractor. Is that based on gross income or after deductions.. Also seems there are income limits for the 20 pct deduction and does the fact I only worked 8 months as an IC matter? Should i say that my independent contractor business ended 31 December or put at end of contract.
I understand i get a 20 pct business deduction as independent contractor.
It's my understanding that's only if you have employees. Since your SCH C business is a disregarded entity, you can not be an employee yourself. But if you had other employees, it's based on a number of factors including your "taxable" business income.
Should i say that my independent contractor business ended 31 December or put at end of contract.
Your business ended the day it ended. Period. If that was at the end of a contract, then that's it.
Closed SCH C Business
You need to report your business as "sold or otherwise disposed of".
Start working through your business "as if" you still own it. On the 2nd or 3rd screen in select the option for "I sold, closed or otherwise disposed of this business in 2019". If prompted for the date, enter the day after you last day of business in 2019.
If your business had no income in the tax year, you can not leave the business income section blank. You 'must' enter a digit, even if that digit is a ZERO.
If you had no business expenses, then you can leave that blank and don't even have to work that section through, if you don't want to.
If your business carried an inventory, the end of year (EOY) inventory must be zero. If it's not, then in the COGS section (Inventory/Cost of Goods Sold) indicate that you removed the entire remaining inventory for personal use. That effectively makes your EOY inventory balance, zero.
If your business had assets, then you must show the disposition of those assets. In the Business Assets section work through each individual asset on at a time, and select YES on the screen, "DId you stop using this asset in 2018?". Then on the next screen, "Special Handling Required?" if you sold the asset, select no and you will be prompted for your sales information on that specific asset. If you did NOT sell the asset, click the YES button. You must do this for each individual asset listed, even if it's already fully depreciated.
If you claimed any vehicle expenses in your business at any time from the day you opened your business, then you must most show the disposition of that vehicle. Work through the Business Vehicle Expenses section and indicate that you stopped using that asset in the business, when prompted. Then show your disposition of that vehicle. Most likely, you'll indicate that it was removed for personal use.
Once you have done all the above, that will make the 2019 tax year the last year you will file a SCH C for this specific business.
In your example.. Does W2 wages mean paid to themselves or workers or does it mean W2 income made outside the business..
If the former , then W2 income outside the business would be zero in calculating excess income?
Jack and Jill are joint filers, and here’s the info they’ll need to calculate their QBI deduction:
- Total taxable income = $400,000
- QBI = $300,000 (and 20% of QBI = $60,000)
- W-2 wages paid = $50,000