2. SELF-EMPLOYMENT/LANDLORDS/INDEPENDENT CONTRACTORS: PROFIT & LOSS STATEMENT
WHAT IS A PROFIT & LOSS STATEMENT?
It may sound complicated, but it is simply a report showing income received and expenses paid. The information must be provided on a CASH BASIS, not ACCRUAL
WHAT IS CASH BASIS?: Cash basis means income is reported as it was actually received (regardless when earned, whether invoiced or not) and expenses are reported as they are actually paid when paid (not when you were billed or invoices which hold but haven't paid).
USING ACCOUNTING SOFTWARE: If you use an accounting software like Quickbooks, you can generate this report quickly if your input data is updated. Remember to select CASH Basis (Accrual is default). You may need to run 2 reports 1) select the appropriate 6 month period (see below under sample P&L) showing each month as a separate column on the report and a total column 2) if the total on the previous report does not show YTD, select year to date period and run that report as well showing only annual total.
NO ACCOUNTING SOFTWARE: If you haven't been tracking your income and expenses, the task will be a bit more cumbersome. You cannot substitute IRS Schedule C for this information because Schedule C provides a total for 12 months and the relevant period for this purpose is exclusively a 6 month period (see below for relevant months).
1) Gather bank statements for past 6 months. If you keep a separate business account, the job will easier.
2) Review the transactions in the bank accounts and gather receipts if necessary for the relevant months and plug the numbers into a spreadsheet.
SELECT APPROPRIATE PROFIT & LOSS STATEMENT BELOW (PDF or Excel). See Sample P&L (type of reasonable & necessary business expenses depend on type of business)
MONTH YOU INTEND TO FILE |
PROFIT & LOSS STATEMENT |
|---|---|
MAY |
PDF / Excel |
JUNE |
PDF / Excel |
JULY |
PDF / Excel |
AUGUST |
PDF / Excel |
SEPTEMBER |
PDF / Excel |
OCTOBER |
PDF / Excel |
NOVEMBER |
PDF / Excel |
DECEMBER |
PDF / Excel |
JANUARY |
PDF / Excel |
FEBRUARY |
PDF / Excel |
MARCH |
PDF / Excel |
APRIL |
PDF / Excel |
