Question

Dalton is self-employed. During the year, he had the following business income and expenses:
Gross receipts, $19,150
Cost of goods sold, $5,000
Advertising, $1,000
Legal and professional fees, $280
Office expense, $125
Supplies, $310
Business license, $100
Utilities, $420

Answer 1

Compute gross profit and subtract business expenses:

- Gross receipts: $19,150
- Cost of goods sold: $5,000
- Gross profit = 19,150 − 5,000 = $14,150

Expenses:
- Advertising: $1,000
- Legal & professional fees: $280
- Office expense: $125
- Supplies: $310
- Business license: $100
- Utilities: $420
- Total expenses = $2,235

Net profit = Gross profit − Total expenses = 14,150 − 2,235 = $11,915

So Dalton’s net self-employment income (Schedule C net profit) is $11,915. This amount is subject to income tax and self-employment tax (if you want, I can calculate the SE tax and the deductible half of it).