[NPD108]

This question was on the Becker practice test –

Marty Smarty is a CPA in private practice. For the current year ended December 31, Marty had the following items of income and expenses with respect to his CPA practice:

Gross revenue

$ 275,000

Rent expense

24,000

Wages paid to employees

60,000

Wages paid to Marty

120,000

Payroll taxes for employees

5,000

Payroll taxes for Marty (estimates)

9,000

Supplies expense

10,000

Insurance expense

8,000

Depreciation expense

15,000

Business meals

4,000

Health insurance for employees

5,000

Health insurance for Marty

2,000

Business bad debt loss (allowance)

3,000

State income taxes for the business

10,000

What is Marty’s taxable income on Schedule C for the CPA practice for the current year?

$146,000

$120,000

$130,000

$144,000

It says the answer is A because they are included on Schedule A itemized deductions. I understand that they are included there, but I am confused because in the book R1-28, Becker says to include State and local business taxes paid on Schedule C. Any help please?

Thanks!

FAR 78
REG 85
BEC 85 DONE
AUD 77

[Ninja20]

Oh even I excluded Taxes .. Also what about self employment taxes ? We consider that in Form 1040 and not in Schedule C ?

Can you some please help ?

[spatel15]

I think you only deduct sales taxes on goods/services, not even sales tax on property. So income tax definitely not.

[Anonymous]

Woah lots of confusion and incorrect information here. State taxes deduct on sched a if itemizing. Sales taxes on inventory are part of 8nventorial costs and r deducted through cogs. Property taxes are sched a or home office deduction if not using the safe harbor method. 1/2 self employment taxes above the line deduction 1040.

[Author]

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