Video instructions and help with filling out and completing Will Form 1065 Schedule M 3 Accrual

Instructions and Help about Will Form 1065 Schedule M 3 Accrual

Hey this is John with PDF Tex this is the qualified business income deduction worksheet for 2018 as a brand new worksheet and it allows you to take 20% deduction on your business income so it's gonna be a lot of people using this worksheet this year and as you can see from the title this is the simplified worksheet and in order to use this worksheet you have to have qualified business income and your income your taxable income has to be less than one hundred and fifty seven and a half thousand or if you're married filing jointly less than three hundred and fifteen thousand so qualified business income is income that from from a business that you would report for example on Schedule C on 1040 or it could be income from a pass-through entity as such as a partnership or an S corporation and all three of those qualify for as business income and so we're gonna see how that works for all three of those you might be wondering what happens if you have taxable income above those two levels that I just mentioned right here and if you do you have to use a different worksheet it's a lot more complex and it's in publication 535 IRS Publication 535 so hopefully you can use this one because it's a lot simpler and the other advantage of this one is the definition of qualified business income is a lot less restricted on this worksheet than it is on the more complex worksheet in other words if you have a Schedule C a partnership a k1 from a partnership or a k1 from a shareholder as a shareholder from an S corporation if you're below those income then it's very likely that you have qualified business income now let's scroll down a little bit here to see how this works so I've gone ahead and set up a Schedule C for Sam Jones he has a retail grocery store and I'm gonna say that he has ten thousand dollars of business income gross receipts and I won't I won't enter any expenses on this Schedule C I'm just using this example to show you how the the qualified business income worksheet works if you want to have more information about how Schedule C works we have a video on that and you can find in our channel so I'm going to keep this pretty simple I'm just gonna say he has ten thousand dollars of net income on 31 line 31 and I've also setup a k1 form that a shareholder would typically receive if he had if he was a shareholder in an S corporation and I'm gonna say that Sam has twelve thousand dollars of business income in his S corporation and then finally here's a k1 for a partnership not too likely that Sam would have three different sources of business income but for this example it's at least it's impossible so we're just using this as an example to show you how that works she works and we'll say that fourteen thousand dollars of income here like that so now if we scroll back up to our worksheet all of that came through right here you've got the business name the employer ID and the qualified business income comes through right there for a total of thirty six thousand dollars and twenty percent of that is seventy two hundred now let's look to see how the 70-200 affects the 10:40 how he how he gets to take that deduction of 7200 on its form 1040 but first let's scroll up here this is the form 1040 as you can see I'm using the draft copy because the final version isn't out yet but draft copy is going to be pretty similar to what the final version looks like so I think we're gonna be ok with that so on schedule 1 here we need to enter that $10,000 from that Schedule C right there and then you remember he had 12,000 on his 1120 sk1 and 14,000 on his partnership k1 so that goes on line 17 a total of 26,000 goes right there and that equals that 36,000 that we saw earlier now let's scroll up a little bit further to see how this affects the rest of the tax return this is a second page of the form 1040 and there's our $36,000 right there and there is our qualified business income deduction right there seventy two hundred dollars in addition to that we're going to say that he had $40,000 of wage income from a job that he had and then he has a standard deduction since he's single of $12,000 which goes right there like that and in addition to that he has on schedule for he has a self-employment tax because of that ten thousand dollars he had on its Schedule C so let's go down to schedule for and here on line 57 that the self-employment tax is one four one three like that but he also gets to deduct half of that self-employment tax on its tax return on Schedule one so I'm Schedule one lying 27 half of that is 707 like that so if we go back up again to this 1040 now as taxable income is 56 thousand and ninety three dollars and if we look in the text table in the instructions for 1040 we will see that the text on that is eighty to eighty just like that so there we go for that not just a couple of other things before we can finish this here he probably made an estimated payment for those for that income that he had of $36,000 and hopefully he did that would go on schedule five down here on line 66 and let's say he made a payment of six thousand dollars look like that and going back up here there's the