Stephanie Zane is the sole proprietor of Shear Madness, a hair salon. Her revenue comes from two sources, haircuts and the sale of "hair products. Stephanie has three employees whose compensation consists of a weekly salary and a 40% commission on the services they provide to the customer. Stephanie uses a hybrid method of accounting-the cash method for haircuts and the accrual method for sales of hair products. For the current year she has the following revenue and expenses:
Revenue from haircuts............................................. $141,650
Revenue from the sale of products................................ 36,240
Beginning inventory of product.................................... 1,756
Ending inventory of product....................................... 1,469
Product purchased................................................... 18,345
Gross salaries (including commission) ........................... 66,000
Social Security taxes................................................. 5,049
Employee withholding:
Social Security taxes................................................. 5,049
Federal taxes.......................................................... 15,200
State taxes............................................................. 4,200
Other payroll taxes................................................... 375
Advertising............................................................ 1,200
Rent.................................................................... 12,100
Utilities................................................................ 1,600
Phone.................................................................. 570
Postage................................................................ 220
Accounting fees...................................................... 1,200
Legal fees.............................................................. 625
Complete Form 1040 Schedule C (Profit or Loss From Business) and Form 1040 Schedule SE (Self-Employment Tax) using the above information. Stephanie's Social Security number is 123-62-7897, her employer [D number is 05-9987561, and her business address is 99 Fortin Lane, Metuchen, New Jersey 07865. forms and instructions can be downloaded from the IRS Web site (www.irs.gov).