Sch C or Sch E?

[superman]

Client owns a hair salon and also the building it is located in. First yr doing the taxes and upon looking on last years return the preparer took the same expenses on both the sch c and sch e. I look at the list he provided to me and they seem to be expenses for the building such as morgt interest, prop taxes , ect. Stuff related to owning the building and expenses you would incur for such ownership.

Problem is now this year his self employment tax is a lot higher. Could these expenses be taken on the sch c and not on the sch e or do they need to be taken strictly on the E since he collects rent from other stylist that are in the same building.

Any direction is greatly appericated.

Superman

[erchess]

Will take a crack at this

I'm assuming that neither the hair salon nor the building is an entity or perhaps the salon could be a single owner LLC. (BTW if you have not specifically asked, you might want to. I have gotten all the way to the end of a return before the client thought to tell me that the business was incorporated and ask whether that changed anything. In my defense the receptionist was supposed to have inquired about entities and sent those to another office. Sill, I have never again forgotten to inquire for myself.)

I don't think Sch E comes into the picture. It would be pleasant for the TP to put the income paid by the other stylists on E where it would not be subject to SE Tax but I believe this would not survive an examination.

[solomon]

It might be worth while to review the MSSP on Beauty and Barber Shops.

[Bees Knees]

If the other stylists are renting chairs or a space in the building (even if a separate room) which appear to the public as being a part of the same hair salon, then he reports all income and expenses on his Schedule C. If the other stylists are renting separate rooms with separate hair salon businesses in a building with separate entrances for each separate hair salon business (it appears to the public that there are several hair salons next to each other competing with each other), and your client is only collecting rent and not a percentage of income from their separate businesses, then the rental income and related expenses goes on Schedule E.