Delivery: Text Based
Instructor: WiseGuides
Credit Hours: 4
Field of Study: Federal Tax Update
Approval: IRS, CTEC
Course Description:

Why take this course? For tax year 2015, taxpayers reported nonfarm sole proprietorship activity on
approximately 25.2 million individual income tax returns using Schedule C forms. Most of these
represent small, often home-based businesses. (Reference: Fall 2017 issue of Statistics of Income
Bulletin.)
The following bullets highlight the reasons that tax preparers need to hone their skills in preparing
returns with self-employment income.
 The IRS estimates that approximately one-third of the annual #mtax gap#m is a result of under-
reported income or over-stated deductions on Schedule C businesses.
 Since self-employed income reported on a return that also claims the Earned Income Tax Credit
may be a high source of tax noncompliance, preparers are held to a higher due diligence
standard for such returns.
 A number of taxpayers who have significant income from other sources reduce their taxable
income by reporting losses from activities that may or may not be engaged in for profit.
 The IRS continues to review tax returns prepared by selected preparers and finds that many
have a high percentage of traits that typically indicates errors on Form 1040, Schedule C, Profit
or Loss from Business (Sole Proprietorship).
This 4-CE hour course, Avoiding Schedule C Tax Abuse, starts with determining if an activity is
engaged in with a profit motive versus as a hobby and how to report hobby income and related
expenses. Next, since falsifying income to claim tax credits remains a popular tactic to game the
system, IRS preparer oversight and return correspondence audit initiatives are presented.
Fundamental income and expense concepts of returns with self-employed income are next
presented including: the determination of reportable gross receipts and appropriate business
deductions, including a review of self-employment tax and net operating loss (NOL) rules.
> NOTE. As a basic level course, the content primarily focuses on the small home-based
business, which uses the cash method basis of reporting. Hence, issues such as advanced
inventory and cost-of-goods sold concepts are not addressed in this course.
After completing this 4-CE hour self-study online course, Avoiding Schedule C Tax Abuse, you will
be able to:

• Identify reporting requirements of Schedule C activity
• Identify taxpayers who are subject to the self-employment (SE) tax
• Identify treatment of various income items
• Identify basic concepts of calculating gross income and cost of goods sold
• Identify allowable deductions
• Identify the basic rules of Net Operating Losses (NOLs)