Sole Proprietorship - Schedule C

One of the changes imposed by the Tax Cuts and Jobs Act is the creation of new Section 199A, “Qualified Business Income”.
This new code section, non-corporate taxpayers (including trusts and estates) that have Qualified Business Income (“QBI”) from a partnership, S Corporation or sole proprietorship can take a deduction of up to 20% of the QBI.

QBI is generally defined as the net amount of income, gain, deduction and loss relating to a qualified trade or business and effectively connected to the conduct of the trade or business within the United States.

If the net amount is less than zero, the amount is treated as a loss from a qualified trade or business in the succeeding tax year.

Certain types of income are specifically excluded from being treated as QBI, and thus not eligible for the deduction. Investment income along with reasonable compensation payments, guaranteed payment to a partner for services rendered and payments for services to partners not acting in their capacity as partners are not included.

The deduction is a deduction from AGI in arriving at Taxable Income. It is not an or above the line deduction.

A limitation is imposed on income from certain specified service businesses, including businesses that perform services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing with securities and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.

Specifically exempt from the definition of service business are engineering and architectural services.

For pass-through income from a service business, a limitation phases in when the owner’s taxable income (from all sources) exceeds $157,500 for single taxpayers and $315,000 for married taxpayers filing joint returns and is completely phased-out when taxable income exceeds $207,500 and $415,000 respectively.

A second limitation applies based upon W-2 wages and capital of a trade or business. In general, the deduction cannot exceed the greater of 50% of the W-2 wages of the business; or the sum of 25% of the W-2 wages paid plus 2.5% of the unadjusted basis, immediately after acquisition, of all “qualified property”.

Qualified property is defined as all tangible, depreciable property held by and used by the business at the close of the year.

The limitation based on W-2 wages and capital does not apply to any passthru entity owner with taxable income that does not exceed the $157,500/$315,000 threshold. Once income exceeds this amount, the W2/Capital limitation phases in and applies fully once the taxpayer’s taxable income exceeds the $207,500/$415,000 threshold

You can carryback your current years loss 2 years then forward 20 years.
A 3 year carryback is available for a NOL attributable to casualty losses or a presidential declared disaster.
A farming NOL can be carried back 5 years.

No. you may make an election to forego the carryback. You must attach a statement claiming to forego the carryback and file it with the current years tax return by the due date plus extensions.

A sole proprietorship is a business opened under the name of one individual or married couple. The sole proprietorship is not a separate entity, and all taxes are filed on a personal tax return. There are many advantages to starting a sole proprietorship. You can start a sole proprietorship with as little as $20 because in most states this is the most you will pay for a business permit. Other more expensive filings are not needed, so you can save the money you would spend on a lawyer on your business. In a sole proprietorship, the owner keeps all the profits. You do not have to share profits with investors as you would with a corporation. As opposed to a corporation, you can use fund from your business for personal use. In business forms where there are partners or investors, you have to get permission to take money out of the company for personal expenditures. The owner is the decision maker in a proprietorship, so you do not have to clear decisions with a board of directors or a partner in a partnership. If your business fails, all losses are your own, and you don't have the headache of paying back business partners. You will also have no lawsuits from angry investors as you would have with a corporation.

A sole proprietorship is one of the four basic types of business entities. It is the easiest kind of organization to create but it also has some of the largest drawbacks. A sole proprietorship is not registered with the state as a corporation or limited liability company. Sole proprietors are generally not shielded from liability when it comes to the company's actions. Unlike LLC's or corporations, there is no "corporate veil" shielding the individuals from the responsibilities of the company. Sole proprietorship are not separable for tax purposes. That means the owner and the business is viewed as the same entity by the government and are taxed as a single entity. Also, sole proprietorship generally has the fewest tax breaks and benefits. Business debts under a sole proprietorship are not separable from the owner's personal debts. That means your personal possessions can be sought by creditors if you default on payments or loans. A sole proprietorship is a one person operation. You can not take on partners or others to run it with you, only employees. With no partners and unlimited liability, it can often be difficult for sole proprietorships to get funding. As the only person in control, owners of sole proprietorships can have unlimited demands placed on their time.

DBA is an acronym for "Doing Business As". It is also known as a Fictitious Name. Most states require that sole proprietorships and partnerships that are conducting business under a name other than the owner(s) must file for a DBA certificate in the county where business is conducted. The DBA certificate is generally obtained at the Clerk of Court of the county in which business will be conducted. Fees are typically between $100 and $225 and most courthouses have records that may be searched to determine if your suggested name will be unique.

You would file a separate Schedule C with Form 1040 for every different business you are involved in which is not incorporated or a multi member LLC.

A married couple filing jointly can file on 1 Schedule C instead of filing a partnership tax return.

No. 100% of the health insurance premiums paid for yourself, your spouse and your dependents are claimed as an adjustment to income on Form 1040 line 29.