BEING SELF-EMPLOYED (T/G 101) covers the aptitudes and self-reliance of independent-minded persons who go "into business for themselves" (in proprietorship form), and who want to understand the role of employees, nonemployees, business use of home and car, cost of goods sold, and the recordkeeping therewith. Also covered:

• Material participation requirements.
• Separate schedules if married
• Listed property & its depreciation
• The $25,000 "special election"
• Cash/barter transaction precautions
• Early start self-retirement plans

Being Self-Employed
Book: 101
Table of Content

1.  GENERAL REQUIREMENTS                        1-1

    Workplace Human Types                       1-2
    Employee Experience Essential               1-3
    Ever Examine a W-2?                         1-5
    Consistent, Timely Tax Returns              1-7
    Savings and Investments                     1-8
    Calculated Risks and Insurance              1-9
    Awareness of Lawsuits                       1-11
    Treatment of Customers                      1-12
    Importance of Spousal Support               1-13

2.  HOW TAX DEFINED                             2-1

    Section 1401 Overview                       2-2
    Section 1402 Overview                       2-3
    “Net Earnings” Defined                      2-4
    Business “Gross Income”                     2-5
    Less the “Deductions Allowed”               2-6
    Meaning of “Trade or Business”              2-8
    Husband and Wife Business                   2-9
    Partnership Business                        2-11
    Statutory Exemptions Limited                2-12
    Section 1403: Insurance Contributions?      2-13

3.  KEEPING PROPER RECORDS                      3-1

    Why Records Important                       3-2
    Your “Official Notice”                      3-3
    Typical Mistakes Made                       3-5
    Business Bank Account                       3-6
    Keep Bank Records Available                 3-7
    Understanding Capitalization                3-9
    Capital Account Records                     3-10
    Slow Moving Inventory                       3-12
    Compensation to Others                      3-13
    Simplified Expense Records                  3-15
    Your Ultimate Goal                          3-17

4.  BUSINESS USE OF HOME                        4-1

    Section 280A ( c ): Introduction            4-2
    Regular and Exclusive Use                   4-3
    Principal Place of Business                 4-4
    Meeting Place With Customers                4-6
    Use of Separate Structure                   4-8
    Storage of Inventory                        4-8
    Day Care Services                           4-9
    Business Use Percentage                     4-11
    List of Deductible Expenses                 4-13
    Form 8829: Overview                         4-14
    Direct vs. Indirect Expenses                4-15
    The Telephone Problem                       4-17
    File With Schedule C                        4-18

5.  DIRECT COST ITEMS                           5-1 

    “Direct Costs” Defined                      5-2
    Returns and Allowances                      5-3
    Sales Tax, If Included                      5-5
    Cost of Goods Sold                          5-7
    Purchases for Resale                        5-8
    Labor and Other Costs                       5-9
    Materials and Supplies                      5-10
    Valuing Closing Inventory                   5-11
    Year-End Accounting                         5-13    
    A Reminder                                  5-14

6.  EMPLOYEES VS. NONEMPLOYEES                  6-1

    Employer ID Number                          6-2
    Liability for Withholdings                  6-3
    Backup Withholding Limited                  6-5
    Employee Form W-4                           6-6
    Nonemployee Form W-9                        6-8
    Payroll Paperwork                           6-9
    Employer Quarterly Returns                  6-10
    What if Nonemployees?                       6-12
    Independent Contractors                     6-15
    Impact of Reclassification                  6-16
    Safe Harbor Rule                            6-17
    Toughing It Out                             6-18

7.  DEPRECIATION, ETC.                          7-1

    Introduction to 4562                        7-2
    The $25,000 Election                        7-3
    MACRS Depreciation Explained                7-5
    The Depreciation Worksheet                  7-7
    “Listed Property” Explained                 7-9
    Business Mileage Log                        7-11
    Luxury Auto Limits                          7-12
    Luxury Auto Leasing                         7-14
    The Summary on Form 4562                    7-16
    Depreciation of Home                        7-17
    Improvements vs. Repairs                    7-19
    Amortizing Intangibles                      7-21
    Disposition of Assets                       7-22

8.  SURVEILLANCE MATTERS                        8-1

    Canvassing Authority                        8-2
    “Cash Basis” Implications                   8-3
    Cash over $10, 000                          8-5
    The 25% Omission Rule                       8-6
    Reconstruction of Income                    8-8
    All Businesses Codified                     8-10
    Special “Research” Audits                   8-11
    Profile Sweeping                            8-14

9.  NET PROFIT OR LOSS                          9-1

    “Material Participation” Defined            9-3
    Adding “Other Income”                       9-4
    Expense Deductions Overview                 9-6
    Some Practical Guidelines                   9-8
    Personal Expenses: No-No                    9-9
    The Capitalization Craze                    9-10
    Travel and Entertainment                    9-12
    Employing Own Children                      9-13
    Other Expenses: Various                     9-14
    Tentative Profit (Loss)                     9-15
    What If Net Loss                            9-16
    Effect of Loss on Form 1040                 9-18
    What If Consecutive Losses                  9-20

10. SE AND ES TAXES                             10-1

    A “Per Worker” Tax                          10-2
    Schedules C, F, & K-1                       10-3
    The “Short” Schedule Se                     10-5
    The 92.35% Parity Factor                    10-7
    The “Long” Schedule SE                      10-8
    Mating With Form 1040                       10-9
    Now, the ES Tax                             10-10
    ES Voucher Forms                            10-12
    Tips on ES Payments                         10-13

11. THE AUDIT STRIKE                            11-1    
    
    Authority to Examine                        11-2
    The Selection Process                       11-3
    Two Basic Audit Types                       11-4
    Notification Letters                        11-7
    The Initial Probing                         11-8
    Examination Procedure: General              11-10
    Bank Deposits Analysis                      11-11
    Report of Audit Changes                     11-14
    When to Disagree Example                    11-16
    How to Disagree                             11-17
    The 20% Accuracy Penalty                    11-18
    Reasonable Cause Exception                  11-20
    Repetitive Audits                           11-21

12. KEOGH AND SEP PLANS                         12-1

    Employee Excludability Limited              12-2
    Compare Master Plans                        12-3
    Computing Contributory Amounts              12-5
    A Two-Keogh Plan                            12-7
    SEP Plans, Generally                        12-9
    SEP Participation Requirements              12-10
    SEP Uniformity                              12-11
    Keogh and SEP Compared                      12-13
    After Age 59-1/2                            12-15