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Lindqvist Studio (Schedule C)
Erik's design studio: books to taxable income.
Preparer Priya Raman · due 2026-03-27
Reviewer Daniel Ortiz · due 2026-04-08
Partner Helen Strand
Time 0 of 3.5 h budget
Erik runs Lindqvist Studio on the cash method in QuickBooks. The books show income 151,300 and net income 89,834.
Taxable net profit is 81,854: the bridge below explains every dollar of difference.
Profit drives self-employment tax 11,565, the SEP deduction 15,214 (18,000 deposited 04/10/2026), the health-insurance deduction 14,400 and the QBI deduction 9,291.
Books to taxable income
QuickBooks P&L line (D14)
Books
Schedule C
Sales - client projects + print and licensing
Engine adds the 1099-K again (see check SCHC-GROSS)
151,300
Advertising
2,100
Car and truck - fuel
Replaced by standard mileage (miles x 0.70)
3,100
Contract labor
7,400
Depreciation (client: SL 5 yrs)
100% special depreciation on 38,000 equipment
7,600
Insurance - business liability
1,450
Insurance - health (Erik)
Moved off Schedule C to Schedule 1 line 17
14,400
Legal and professional
1,800
Meals
50% limit
3,960
Office expenses
1,180
Supplies
3,240
Travel
4,520
Telephone + Internet
Family plan / home internet — business share only (call-01)
3,480
Software and subscriptions
Spotify Family is personal
6,850
Bank and merchant fees
386
Home office (not in books)
Simplified method, monthly average 240 sq ft
—
Net income per books / net profit per Schedule C
89,834
Health insurance is not a Schedule C expense, so books net income + 14,400 is the comparable figure. Purple figures carry a workpaper adjustment (original shown struck through).
Vehicle & home office
Business miles 11,800 of 17,740 driven (odometer, D23) · commuting 0 · in service since 2021-06-01 · home office 1,200
Equipment (invoice D22) and cost recovery choices
Checks that don't trust the engine (7)
SCHC-GROSS · Lindqvist Studio (Schedule C)
Gross receipts reconciled to third-party forms
Fails
The 1099-K 12,400 is already in the books; the engine added it again (gross 163,700 vs 151,300). This is also the answer to the 2028 exam question (1099-NEC 142,000 + 1099-K 12,400 = 154,400 reported vs 151,300 receipts).
Engine 163,700 · recomputed 151,300
How: 1099-NEC total 142,000 + deposits from clients with no 1099 9,300 = 151,300; books total income 151,300. D15: Atlas's 1099-K amount 12,400 was deposited gross and is inside Atlas's 41,200 (also on its 1099-NEC).
Authority: IRC 61; Form 1040 Sch C instructions line 1
SchC.1
163,700 → 151,300 — 1099-K receipts already included in books revenue (D15).
Tax: fed −4,402 · CA −384
Tax: fed −4,402 · CA −384
Explain / dismiss instead
MILEAGE · Lindqvist Studio (Schedule C)
Business miles re-added from the log
Fails
Page 3 is a second scan of page 2 (D23 says so); the engine summed all four page totals. Business miles 8,100 (not 11,800) of 17,740 driven; car expense 8,100 x 0.7 = 5,670.
Engine 11,800 · recomputed 8,100
How: Added every trip in the mileage log and fingerprinted each page's trips to catch rescans. p1: 20 trips = 2,600 (page total 2,600); p2: 22 trips = 3,700 (page total 3,700); p3: 22 trips = 3,700 (page total 3,700); p4: 18 trips = 1,800 (page total 1,800)
Authority: IRC 274(d); Rev. Proc. 2019-46
SchC.44a
11,800 → 8,100 — Remove duplicated page 3.
no tax effect
no tax effect
SchC.9
8,260 → 5,670 — 8,100 business miles x 0.7.
Tax: fed +919 · CA +80
Tax: fed +919 · CA +80
SchC.44c
5,940 → 9,640 — Odometer miles less business miles.
no tax effect
no tax effect
Explain / dismiss instead
MIXED-USE · Lindqvist Studio (Schedule C)
Personal share removed from shared costs
judgmentFails
Utilities 3,480 -> 2,172 (phone 2,160 x 70% + internet 1,320 x 50%); software 6,850 -> 6,634 (less Spotify 216).
Engine 10,330 · recomputed 8,806
How: Call notes (call-01): family phone plan business share 70%, home internet 50%, Spotify Family personal. Books (D14, D15) booked 100%.
Authority: IRC 262; IRC 274(d)
SchC.25
3,480 → 2,172 — Business-use share per client call.
Tax: fed +464 · CA +41
Tax: fed +464 · CA +41
SchC.27a.1
6,850 → 6,634 — Spotify Family is personal (booked by mistake).
Tax: fed +77 · CA +7
Tax: fed +77 · CA +7
Explain / dismiss instead
SEHI-ELIGIBILITY · Lindqvist Studio (Schedule C)
Self-employed health insurance eligibility
Fails
qa-25: 'Yes - both of Ngozi's employers offer family coverage, but Erik kept his own individual plan because he likes his doctors.' Erik was eligible for subsidized coverage through Ngozi's employers every month, so no deduction is allowed for any month. Engine deducted 14,400. (2024 had none for the same reason.)
Engine 14,400 · recomputed 0
How: Engine rule R-SEHI limits the deduction by income only; it never asks whether Erik could join an employer plan. Questionnaire qa-25 answers that.
Authority: IRC 162(l)(2)(B)
Sch1.17
14,400 → 0 — Eligible for an employer-subsidized plan through spouse (IRC 162(l)(2)(B)).
Tax: fed +4,464 · CA +605
Tax: fed +4,464 · CA +605
Explain / dismiss instead
EQUIPMENT · Lindqvist Studio (Schedule C)
Equipment cost and method
judgmentAgrees
Invoice 38,000 = federal depreciation 38,000. Election alternatives (section 179 / MACRS) are in what-ifs: section 179 saves California 1,050.
Engine 38,000 · recomputed 38,000
How: Invoice D22 total; placed in service 03/21/2025 (after 2025-01-19, so 100% special depreciation is the default); books' own 7,600 straight-line replaced.
HOME-OFFICE · Lindqvist Studio (Schedule C)
Home office area by month
Agrees
Average 240 sq ft x $5 = 1,200. Prior preparer claimed 300 sq ft in 2024 for the same 220 sq ft room ('2 rooms combined?') - 2024 was overstated by about 400 of deduction (immaterial; noted for the client).
Engine 1,200 · recomputed 1,200
How: D24: 220 sq ft Jan - mid-July (Sacramento), 260 sq ft from 07/16 (Austin). Months with 15+ days: 6 at 220, 6 at 260.
CONTRACTOR-1099 · Lindqvist Studio (Schedule C)
Information returns the business owes
judgmentoutside filingNeeds judgment
Mara Quintero 4,800 and Dev Patel 2,600 were paid by ACH (not card) - Forms 1099-NEC were due 2026-02-02 and were not filed. Outside our engagement (D01): advise client in writing; Sch C line J answered 'No'.
How: Contractor report D27 and questionnaire qa-22/qa-23.
Authority: IRC 6041A, 6721/6722
Explain / dismiss instead
Documents (14)
| D14 | Lindqvist Studio - Profit and Loss, January-December 2025 (QuickBooks, cash basis)
received 2026-02-11 · client · extracted |
landed on the return | SchC.1, SchC.11, SchC.15, SchC.17 +8 | |
| D15 | Lindqvist Studio - transaction detail for selected accounts
received 2026-02-11 · client · extracted |
evidence for a check Not cited by the engine; used as evidence by SCHC-GROSS, MIXED-USE |
||
| D16 | 2025 Form 1099-NEC - Fennimore Brewing Co.
received 2026-02-03 · client · extracted |
landed on the return | SchC.1 | |
| D17 | 2025 Form 1099-NEC - Atlas Outdoor Gear, Inc.
received 2026-02-04 · client · extracted |
landed on the return | SchC.1 | |
| D18 | 2025 Form 1099-NEC - Sable & Finch Architects LLP
received 2026-02-05 · client · extracted |
landed on the return | SchC.1 | |
| D19 | 2025 Form 1099-NEC - Riverbend Credit Union
received 2026-02-06 · client · extracted |
landed on the return | SchC.1 | |
| D20 | 2025 Form 1099-NEC - Quill Media Group LLC
received 2026-02-07 · client · extracted |
landed on the return | SchC.1 | |
| D21 | 2025 Form 1099-K - Paywell Payments
received 2026-02-06 · client · extracted |
landed on the return | SchC.1 | |
| D22 | Invoice - Vantage Imaging Supply (equipment)
received 2026-02-11 · client · extracted |
landed on the return | F4562-C.12, F4562-C.14, F4562-C.19a | |
| D23 | Vehicle mileage log 2025 (scanned, 4 pages)
received 2026-02-18 · client · extracted |
landed on the return | SchC.43, SchC.44a, SchC.44b, SchC.44c | |
| D24 | Home office measurements (client note)
received 2026-02-18 · client · extracted |
landed on the return | SchC.30 | |
| D25 | Health insurance premium statement 2025 - Erik Lindqvist (individual plan)
received 2026-02-11 · client · extracted |
landed on the return | Sch1.17 | |
| D26 | SEP-IRA contribution confirmation (Erik Lindqvist)
received 2026-04-10 · client · extracted |
landed on the return | Sch1.16 | |
| D27 | Lindqvist Studio - contractor payments report 2025
received 2026-02-11 · client · extracted |
landed on the return | SchC.11, SchC.I |
Every line in this area (51)
Show all 51 lines
| SchC.1 | Gross receipts | 163,700 | |
| SchC.5 | Gross profit | 163,700 | |
| SchC.7 | Gross income | 163,700 | |
| SchC.8 | Advertising | 2,100 | |
| SchC.44a | Business miles (Part IV) | 11,800 | |
| SchC.44b | Commuting miles | 0 | |
| SchC.44c | Other miles | 5,940 | |
| SchC.43 | Date vehicle placed in service for business | 2021-06-01 | |
| SchC.9 | Car and truck expenses (standard mileage) | 8,260 | |
| SchC.11 | Contract labor | 7,400 | |
| F4562-C.12 | Section 179 expense deduction | 0 | |
| F4562-C.14 | Special depreciation allowance (100%) | 38,000 | |
| F4562-C.19a | MACRS 5-year property placed in service 2025 | 0 | |
| F4562-C.22 | Total depreciation (Schedule C) | 38,000 | |
| SchC.13 | Depreciation and section 179 | 38,000 | |
| SchC.15 | Insurance (other than health) | 1,450 | |
| SchC.17 | Legal and professional services | 1,800 | |
| SchC.18 | Office expense | 1,180 | |
| SchC.22 | Supplies | 3,240 | |
| SchC.24a | Travel | 4,520 | |
| SchC.24b | Deductible meals (50%) | 1,980 | |
| SchC.25 | Utilities (telephone and internet) | 3,480 | |
| SchC.27a.1 | Other expenses - software and subscriptions | 6,850 | |
| SchC.27a.2 | Other expenses - bank and merchant fees | 386 | |
| SchC.28 | Total expenses | 80,646 | |
| SchC.29 | Tentative profit | 83,054 | |
| SchC.30 | Home office (simplified method, average 240 sq ft x $5) | 1,200 | |
| SchC.31 | Net profit | 81,854 | |
| SchC.I | Made payments requiring Forms 1099 | Yes | |
| SchC.J | Filed or will file required Forms 1099 | No | |
| SchSE.2 | Net profit from Schedule C | 81,854 | |
| SchSE.4a | Net earnings (x 92.35%) | 75,592 | |
| SchSE.6 | Total net earnings | 75,592 | |
| SchSE.10 | Social security portion | 9,373 | |
| SchSE.11 | Medicare portion | 2,192 | |
| SchSE.12 | Self-employment tax | 11,565 | |
| SchSE.13 | Deduction for one-half of SE tax | 5,783 | |
| Sch1.16 | SEP deduction | 15,214 | |
| Sch1.17 | Self-employed health insurance deduction | 14,400 | |
| Sch1.15 | Deductible part of self-employment tax | 5,783 | |
| Sch1.3 | Business income (Schedule C) | 81,854 | |
| F8995.2.1 | QBI - Lindqvist Studio (Schedule C) | 46,457 | |
| F8995.15.1 | QBI component - Lindqvist Studio (Schedule C) (W-2 wages 0, UBIA 38,000) | 9,291 | |
| F8995.2.2 | QBI - Lindqvist Family Woodworks, Inc. | 18,400 | |
| F8995.15.2 | QBI component - Lindqvist Family Woodworks, Inc. (W-2 wages 41,000, UBIA 120,000) | 3,680 | |
| F8995.27 | Total QBI component | 12,971 | |
| F8995.33 | Taxable income before QBI deduction | 359,884 | |
| F8995.34 | Net capital gain | 152,851 | |
| F8995.36 | Income limitation | 41,407 | |
| F8995.39 | QBI deduction | 12,971 | |
| F1040.13 | Qualified business income deduction | 12,971 |
Sign-off
preparer
not signed
reviewer
not signed
partner
not signed
A sign-off fingerprints every value and document in the area. If anything it covered changes, it reopens on its own and tells the signer what moved.
Time
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