Question

Angel is self-employed. During the tax year, he had the following income and expenses:
Gross receipts, $90,500
Advertising, $2,000
Office expense, $320
Rent, $10,800
Liability insurance, $3,600
Bookkeeping fees, $525
Utilities, $2,600
Business meals with clients, $1,000

Answer 1

To calculate Angel's net income from self-employment, we will first determine his total income and then subtract his allowable business expenses.

### Step 1: Calculate Total Income
- **Gross Receipts:** $90,500

### Step 2: Calculate Total Business Expenses
Now we will list and total up all the business expenses:

- **Advertising:** $2,000
- **Office Expense:** $320
- **Rent:** $10,800
- **Liability Insurance:** $3,600
- **Bookkeeping Fees:** $525
- **Utilities:** $2,600
- **Business Meals with Clients:** $1,000

### Total Expenses Calculation
\[
\text{Total Expenses} = \text{Advertising} + \text{Office Expense} + \text{Rent} + \text{Liability Insurance} + \text{Bookkeeping Fees} + \text{Utilities} + \text{Business Meals}
\]
\[
\text{Total Expenses} = 2,000 + 320 + 10,800 + 3,600 + 525 + 2,600 + 1,000
\]
\[
\text{Total Expenses} = 2,000 + 320 + 10,800 + 3,600 + 525 + 2,600 + 1,000 = 20,845
\]

### Step 3: Calculate Net Income
Now, we will subtract the total expenses from the gross receipts to find the net income.

\[
\text{Net Income} = \text{Gross Receipts} - \text{Total Expenses}
\]
\[
\text{Net Income} = 90,500 - 20,845 = 69,655
\]

### Result
Angel's net income from self-employment for the tax year is **$69,655**.

### Notes:
- **Business Meals:** Generally, only 50% of business meal expenses are deductible, which means that out of the $1,000 spent on business meals, only $500 would be allowed as a deductible expense.

Adjusting the calculation for this deduction:
- Deductible Business Meals: $500
- New Total Expenses:
\[
20,845 - 1,000 + 500 = 20,345
\]
- New Net Income:
\[
90,500 - 20,345 = 70,155
\]

So, the adjusted net income considering the meal deduction would be **$70,155**.