Self employment Expenses

[seanf12]

A small part ($6k or so) of my income derives from self-employment. When filing taxes, I have expenses (on schedule C) that generally offset most of that extra income. Can we include these expenses when filling out a Schedule J in determine eligibility for a chapter 7?

Thanks

[epiphany]

A small part ($6k or so) of my income derives from self-employment. When filing taxes, I have expenses (on schedule C) that generally offset most of that extra income. Can we include these expenses when filling out a Schedule J in determine eligibility for a chapter 7?

Thanks

Hmmm....Interesting question that I hadn't pondered as it also pertains to me. But my thinking is NO. It has already been offset by the extra income. However, this would also mean that you also don't list the 6K as extra income, you only list the income after the amount has been offset by your expenses. In other words, you only include your profit.

I am neither a tax expert or a lawyer but that is how I intend to proceed. Someone please correct me if I'm wrong!

EP

[seanf12]

Exactly, I am thinking you would only need to list your profit. I've been playing around with Best Bet Bankruptcy software and it actually has a supplemental form for business expenses and deductions.

I am going to call our lawyer tomorrow and run it by her, I'll let you know what I find out

[seanf12]

Found this previous post but which seems to answer the question...still going to consult my attorney tomorrow

http://www.bkforum.com/showthread.php?t=21910&highlight=independent+contractor

[tallberry]

seanf12...it sort of answered my question but the main one, I still do not know. That question is....if I deduct my business expenses from my self employed income. Is the bottom line profit what I use on the means test to determine if we are above or below the median income for our state. I still don't know the answer...

[wooisme]

I'm self employed and they used my gross amount before net profit or loss for the means test.
but i'm in chapter 13, not 7 also i can deduct for business expenses.

[seanf12]

In the means test there is a line for "Ordinary and necessary business Expenses", so you are saying your attorney did not enter anything in there? Did they give you a reason?

[seanf12]

Or if I understand it correctly, business expenses only apply when determining if you are above/below the median income level. If you are below, then the means test is not necessary, correct?

[tallberry]

Yes, sean, you are asking the exact question I have been trying to confirm. In looking at question 4 on the "Part 2 Calculation of Income (6-mo avg)for Median Income Test...to me, it clearly states that I take my income from being self-employed(4a) then I subtract my business expenses (4b) which brings me to (4c) my Business Income. So in essence, your business expenses are "deducted" when determining your income for the Median Income Test. One more question relative to this question...in my case, I was paid for one month on a regular W-2 from my previous employer, should just that amount be on line 3 of the above test? And then my Self-employment income would go on (4a)? sean...is this also your situation?

[seanf12]

Pretty much the same as my situation, yes. I have a primary job for which I receive a W-2, and then part-time self-employment for which I receive a 1099 at the end of the year (independent contractor). For past the several years I have had enough business expenses to show a net loss on my Schedule C when filing my taxes.

I am calling a couple of different lawyers today to try and get more info. I'll post back when I hopefully have some answers

[tallberry]

I'll do the same sean...let's see if we can get to the bottom of this :o)