Figuring out what other preparer did

[RNuse09]

Hello,

Sorry for all of the questions the last few days. After doing some research I think what a client of mines old preparer did is incorrect. He owns a small restaurant and has a few employees. I feel that the sales tax he is collecting and the employers share of fica, futa, and state unemployment should go on line 23 of the sched c. However he put these in other expenses. Is there any reason a preparer would do this. Again sorry for the questions.

Thanks,

[Burke]

Maybe he wanted to break each one down separately? Who knows. Should not have changed the bottom line.

[S T]

Well

I can not say it is right or wrong

Cash Basis

Sched C - If gross sales include sales tax I enter on Line 1 of Sched C
Line 2 would be the sales tax amount included in Line 1, so that Line 3 equals the gross sales not including sales tax. Line 1 would then should match with his receipts and hopefully his bank account records.

On Line 23 - I break down the payroll taxes paid by employer (my software allows for a detail sheet - so I break down each employer payroll expense, such as FICA, Mcare, FUTA, SUI, then any additional taxes paid such as business property tax on equipment, licenses, etc.

Personally I don't like the line 27 Other expenses and try to keep it to a minimum entries that I have not been able to add to the Line 8-26 entries on Sched C - however, I do use a lot of detail sheets for backup. Don't know if the IRS reveiws them, however, they are always there in the event of an audit.

Hope this helps

Sandy

[RNuse09]

Thanks

Thanks for the responses. I honestly didn't think medicare was deductible Sandy. I am looking at page 5-11 of the taxbook.

[S T]

Payroll

Mcare is a deduction of 1.45 on the Employer side -
Employer contributes in 2010 6.2 to FIca
Employer contributes in 2010 1.45 to Mcare
Employer contributes in 2010 .8 to Futa on first $7,000 of each employees wage
Employer contributes in 2010 the Suta/Sui to State unemployment - whatever those rates are for your client

Some payroll services and/or preparers will combine the Fica/Mcare and list them together - which would be 7.65% in 2010

Sandy