Common questions about Schedule F in ProSeries

ProSeries doesn't support a home office worksheet for Schedule F to enter home office expenses. Per the IRS Instructions for Form 8829:

"Do not use Form 8829 in the following situations.

• You are claiming expenses for business use of your home as an employee or a partner or you are claiming these expenses on Schedule F (Form 1040). Instead, complete the Worksheet To Figure the Deduction for Business Use of Your Home in IRS Pub. 587 . (You cannot claim expenses for business use of your home as an employee.)"

Once the worksheet is completed, IRS Pub. 587 states if you file Schedule F (Form 1040), report your entire deduction for business use of the home (line 34 of the Worksheet to Figure the Deduction for Business Use of Your Home), up to the limit on line 32 of Schedule F.  Enter "Business Use of Home" on the dotted line beside the entry.

Section 8215 (Family Business Tax Simplification) of the Small Business and Work Opportunity Tax Act of 2007 applies to married couples filing a joint return who jointly own and operate a business. They may now choose to opt out of the partnership rules if certain criteria are met. Both will be subject to their own self-employment taxes.

Electing this provision in ProSeries

If a client's Schedule C or F has previously been filed in ProSeries by selecting the "joint ownership" box, and the client doesn't live in a community property state, their business must be filed using either two Schedules C or F or as a partnership on Form 1065 for current year.

If the taxpayers elect to file two Schedules C or F, you'll need to split the income, deductions, depreciable assets, carryovers, etc. between the two business schedules.

If the current year return will have two schedules when the prior-year return only had one, when transferring carryover information (including depreciable assets) from prior year to current year, you'll need to split these amounts using one of the following two methods:

Method 1 - Before transferring prior-year client files to the current year

To split the prior year business information into two separate Schedules C or F before transferring the client's return into the current year ProSeries program:

1. Open the client's prior-year return in the prior-year ProSeries program.
2. From the File menu, select Save As and save the return using a different name (so the originally filed return isn't modified).
3. Open the new return.
4. Create a new Schedule C or Schedule F.
5. Using the appropriate ownership percentage for each spouse, split the prior-year income, deductions, depreciable assets, vehicles, credits, etc. into the resulting two Schedules C or F (one Schedule C or F for the taxpayer and the other for the spouse).
   • Splitting the depreciable assets requires creating new Asset Entry Worksheets.
   • Splitting the vehicle expenses also requires creating new Car and Truck Expenses Worksheets.
6. Mark the appropriate ownership box on each Schedule C or F.
7. Save this return with the two separate Schedules C or F.
8. Transfer this new return into the current year's ProSeries program.
   • After transferring, the current year return will have two separate Schedules C or F with the appropriate ownership indicators, carryovers, depreciable assets, etc. These schedules are now ready for you to enter amounts for the current year.

Method 2 - After transferring prior-year client files to the current year

To split the business information into two separate Schedules C or F after transferring the client's return into the current year ProSeries program:

1. Transfer the client's prior-year return into the current year ProSeries program.
2. Open the client's current year return in the current year ProSeries program.
3. Create a second Schedule C or F.
4. Using the appropriate ownership percentage for each spouse, split the current year depreciable assets, vehicles, carryovers, etc. into two Schedules C or F (one Schedule C or F for the taxpayer and the other for the spouse).
   • Splitting the depreciable assets requires creating new Asset Entry Worksheets.
   • Splitting the vehicle expenses also requires creating new Car and Truck Expenses Worksheets.
5. Mark the appropriate ownership box on each Schedule C or F.
6. Save this return with the two separate Schedules C or F.
   • These schedules are now ready for you to enter current year amounts.

Breeding cattle have a 5-year life for depreciation purposes. In ProSeries, there's no specific asset type for cattle.

Follow these steps to depreciate cattle in ProSeries using MACRS and the 150DB method:

1. Open an Asset Entry Worksheet attached to Schedule F.
2.  Enter a Description of cow, Date placed in service, and Cost or basis.
3. For Type of Asset, select Code D.
   • The description of this code is "Typewriter, calculator, copier".  

The description of Code D is only visible on the Asset Entry Worksheet. The Depreciation Reports won't show the Code D description, only the description entered for the asset.

For example: Bull 44

At the bottom of the asset entry worksheet:

• Depreciation type = MACRS
• Asset class = 5
• Depreciation method = 150 DB

Follow these steps to enter sale information for the cow:

1. On the Asset Entry Worksheet, go to the disposition section and enter the date.
   • The Property type field will automatically complete with "Trade or Business". 
2. At the far right side of the Property type field, use the dropdown arrow to select Cattle or Horses.
3. Complete the rest of sale information in the usual manner.

Refer to IRS Pub. 225 (Table 7.1) for more information.

Per Tax Help for Schedule C:

Who operated the business:

Check the box to indicate who operated this business. This determines whose name (taxpayer or spouse) and Social Security Number prints on this copy of Schedule C. No entry is required if the business is operated solely by the taxpayer. Under the Small Business and Work Opportunity Tax Act of 2007, the Family Business Tax Simplification provision permits a qualified joint venture whose only members are a husband and wife filing a joint return to NOT be treated as a partnership for Federal tax purposes. However, the IRS has determined that if a sole proprietorship is owned and operated jointly by a taxpayer and spouse, either a partnership return should be filed and the income reported on a Schedule K-1 OR each spouse should file their own separate Schedule C, prorating the income and expenses based on each person's ownership percentage.

EXCEPTION: If a sole proprietorship is wholly owned jointly as community property in a community property state, foreign country, or U.S. possession, the business may be treated either as a sole proprietorship or as a partnership.

If you are reporting a jointly-owned business on two separate Schedules C, prorate each of the amounts before making the entries on each of the individual Schedules C.

Entries here also determine whether the taxpayer or the spouse will receive the net business profit or loss as part of the self-employment earnings calculation on Schedule SE. If the Joint ownership box is checked, the net gain or loss from line 31 will be split so that 50% flows to the taxpayer's Schedule SE and 50% flows to the spouse's Schedule SE.

Per Tax Help for Schedule F:

Farm operated by the taxpayer or spouse:

Entries in these boxes determine which name and SSN to print on this copy of Schedule F. If no entry is made, the program defaults to the taxpayer as the owner. Under the Small Business and Work Opportunity Tax Act of 2007, the Family Business Tax Simplification provision permits a qualified joint venture whose only members are a husband and wife filing a joint return to NOT be treated as a partnership for Federal tax purposes. However, the IRS has determined that if a farm is owned and operated jointly by a taxpayer and a spouse, either a partnership return should be filed and the income reported on separate Schedules K-1 OR each spouse should file their own separate Schedule F, prorating the income and expenses based on each person's ownership percentage.

If a jointly-owned farm is being reported on two separate Schedules F, prorate each amount before making the entries on each of the individual Schedules F.

Electing to be treated as a qualified joint venture will not usually increase the total tax owed on a joint return, but will allow the taxpayer and spouse credit for social security earnings and for Medicare coverage without having to file a partnership return.

Entries here also determine whether the taxpayer or the spouse will receive the net farm profit or loss as part of the self-employment earnings calculation on Schedule SE.

Data will flow to Schedule F line 8 from the following forms:

• Form 1099-Misc and link to the Schedule F.
• Form 1099-G and link to the Schedule F.
• Canceled Debt Worksheet and link to the Schedule F.

For all other income, there is an entry box above line 8 on the Schedule F: Enter income (not reported on 1099).

1. Open the Schedule F.
2. Scroll to the bottom where it says Carryovers to 2024 Smart Worksheet.
3. Double-click line B - Schedule F suspended loss.
   • A support statement will open up.
4. Enter in each year for the description and the amounts for each year.
   • Supporting statements aren't filed with the tax return. This is just for your notes or for the customers notes. This will print out with the return unless you check the box at the top of the statement that says Check this box to NOT print this supporting statement.