Business Farm Supplement

<p>Hi, I wanted to ask: what is the difference between 11a (Gross receipts or sales less returns and allowances) and 13d (parents' W-2 wages from this business). My parents have 100% ownership of the business, so what do I need to look at to fill in 11a and 13d? Thanks!</p>

<p>Anyone? .</p>

<p>I don't have the form in front of me, but in general, gross receipts less returns would be a function of the income of the business (you sold $500 worth of tshirts, you paid $100 for the tshirts, your gross profit is $400), while w-2 wages from the business would be what your parents took out in PAYROLL. So if your dad gets a payroll check of $500 per week, that goes in 13d. If it's an LLC though, or a sole proprietorship it might be different. Hold on and let me look up the form....</p>

<p>OK, now that I see the form. Line 11a is looking for just what it says, gross receipts less returns. If you sold $100.00 in stuff and $5.00 got returned, that number would be $95.00. Then you enter in the other expenses (the $100 you paid for the tshirts, etc) and end up with your income.</p>

<p>On line 13d they want to know the wages your parents were paid for working at the business.</p>

<p>As for what you need to look at, payroll records and profit and loss statements.</p>

<p>If your parents business is incorporated, and is an S-Corp, you should be able to find all of the numbers on their 1120S. In an S-corp, your parents business would pay them and give them a W-2. Once you subtract out wages and expenses you will come up with the net profit and loss (line 15) and since your parents own the business 100%,that number would also go on line 16 (in my case it was a minimal amount)</p>

<p>If they are a sole proprietorship (not incorporated) you should be able to find all of the info on schedule C. In this case, your parents do not get W-2 wages, so the net profit and loss (line 15) is the business income that they report on their 1040. Essentially, that is what they earn but it is not reflected as "wages". </p>

<p>If their business is an an LLC, I don't have a clue. </p>

<p>Don't forget to itemize the "other expenses" if any expense is over $1000. For a sole proprietor ship this could include office supplies, advertising, auto expenses, legal and professional, liability insurance, phone etc. For the
S-Corp this includes all of the above plus social security tax, medicaid, unemployment tax etc.</p>