Preparing the Return for Stanley Price Stanley Price owns and operates Stan's Barber Shop. He has been inbusiness for 32 years. Stanley uses the cash method of accounting andfiles his return on a calendar year basis. Schedule C-EZ Stanley uses Schedule C-EZ to report the net profit from hisbusiness because he meets all of the requirements listed in Part I ofthe schedule. Stanley enters his name and social security number atthe top of the schedule. Part I-General Information Stanley fills out Part I as follows: Line A.He enters his principal business. Line B.He enters 812111, which is the 6-digit business code for a barbershop. He found the code on page C-9 of the instructions forSchedule C. Stanley locates the major business category that describeshis business. He reads down the items under "Personal and LaundryServices" (part of "Other Services") to find812111--"Barber shops." Line C.He enters the name of his business--"Stan's Barber Shop." Line D.Stanley leaves this line blank. He does not have an employeridentification number (EIN) because he is not required to have one.For information about EINs, see Identification Numbers inchapter 1. Line E.He enters his business address. Part II-Figure Your Net Profit Stanley fills out Part II as follows: Line 1-Gross receipts.Stanley enters his gross receipts from cutting hair. They includethe amounts he charged for haircuts and all the tips received from hiscustomers. The total for the year was $27,000. Line 2-Total expenses.Stanley enters his expenses for the year. They total $2,330 andconsist of the following: Advertising in the local newspaper--$145 Supplies--$475 Business licenses--$150 Utilities (electricity and water)--$360 Rent--$1,200 Line 3-Net profit.Stanley subtracts his total expenses ($2,330) from his grossreceipts ($27,000) to get his net profit of $24,670. He enters his netprofit here, on line 12 of Form 1040, and on line 2, Section A ofSchedule SE (Form 1040). Part III-Information on Your Vehicle Stanley leaves this part blank because he is not deducting car ortruck expenses. Schedule SE--Self-Employment Tax After Stanley prepares Schedule C-EZ, he fills out ScheduleSE. He starts by entering his name and social security number at thetop of the schedule. Then he reads the chart on page 1 of the schedulewhich tells him he can use Section A--Short Schedule SEHeraklion hotel roomsto figure his self-employment tax. He fills out the followinglines in Section A. Lines 2 and 3.He enters $24,670. This is his net profit from line 3 of ScheduleC-EZ. Line 4.He multiplies $24,670 by .9235 to get his net earnings fromself-employment ($22,783). This is the amount of his net profitsubject to self-employment tax. Line 5.Because the amount on line 4 is less than $72,600, Stanleymultiplies the amount on line 4 ($22,783) by .153 to get hisself-employment tax of $3,486. He enters that amount here and on line50 of Form 1040. Line 6.He multiplies the amount on line 5 by .5 to get his deduction forone-half of self-employment tax of $1,743. He enters that amount hereand on line 27 of Form 1040. Form 1040 Stanley fills out Form 1040 as follows: Name, address, and social security number.Stanley enters his name, home address, and social security number. Presidential election campaign fund.Stanley chooses to have $3 go to this fund. He checks the box under"Yes." Line 1.Stanley checks the box on this line because he is filing as single. Lines 6a and 6d.Stanley claims an exemption for himself. He checks the box next to"Yourself" and enters "1" in the far right-hand entry space.He also enters "1" in the box on line 6d. Line 8a.Stanley enters $295 of taxable interest that was credited to hispersonal savings account for the year. Line 9.Stanley enters $145 of dividends he received from ABC Corporation. Line 12.He enters his business net profit from line 3 of ScheduleC-EZ. Line 22.Stanley adds the amounts on lines 7 through 21 and enters thetotal, $25,110. Line 23.Stanley enters the $2,000 contribution he made for the year to hisindividual retirement arrangement (IRA). According to the Form 1040instructions, he can deduct this amount. Line 27.Stanley enters one-half of his self-employment tax. He got thisamount from line 6 in Section A of Schedule SE. Line 32.Stanley adds the amounts on lines 23 through 31a and enters thetotal, $3,743. Line 33.Stanley subtracts the amount on line 32 from the amount on line 22to arrive at his adjusted gross income, $21,367. He also enters thisamount on line 34. Line 36.He enters $4,300. This is the standard deduction for a singlefiler. Line 37.Stanley subtracts line 36 from line 34 to get $17,067. Line 38.He multiplies $2,750 by the number of exemptions claimed on line 6dto get his total exemptions, $2,750. Line 39.Stanley subtracts line 38 from line 37 to get his taxable income,$14,317. Line 40.Stanley uses the Tax Table in the Form 1040 instructions to figurehis income tax. In the Tax Table he looks for the income bracket thatincludes $14,317. He finds the bracket for incomes of at least$14,300, but less than $14,350 and sees that the tax for a personfiling as single is $2,149. He enters this amount here. Lines 48 and 49.Because Stanley does not have any of the credits listed on lines 41through 47, he enters -0- on line 48, subtracts it from line 40, andenters $2,149 on line 49. Line 50.He enters $3,486 from line 5 in Section A of Schedule SE. Line 56.Stanley adds the amounts on lines 49 through 55 and enters thetotal, $5,635. Line 58.He enters $6,000 estimated tax payments he made for the year. Line 64.He enters $6,000. Lines 65 and 66a.Stanley subtracts line 56 from line 64 to arrive at the amount heoverpaid, $365. He wants this amount refunded to him and also entersit on line 66a. The IRS will send him a check for this amount providedhe owes no other taxes. If Stanley wanted the refund depositeddirectly into his checking or savings account, he would have had tocomplete lines 66b, c, and d. Signing and assembling the return.He signs his name and enters the date signed and his occupation. Hemakes a copy of the return and schedules for his records. Then heassembles his original Form 1040, Schedules C-EZ and SE in thatorder. (See "Attachment Sequence Number" in the upper rightcorner of each schedule or form.) Finally, he mails it to the IRS. Stanley Price's Form 1040, pg 1 Stanley Price's Form 1040, pg 2 Stanley Price's Schedule C-EZ, pg 1 Stanley Price's Schedule SE, pg 1