Mila De Jong is your client. She has emigrated from the Netherlands and has lived in the United States for the last 10 years. She is a naturalized U.S. citizen. Mila owns a small flower shop, which she runs as a sole proprietorship and reports her earnings on Schedule C. Mila usually keeps her receipts in a digital file and brings you a Excel spreadsheet in which she tracks her income and expenses by month for the year.

However, Mila does not understand the U.S. tax system and laws very well because in the Netherlands, there is a Value-Added Tax (VAT) system in which you can either deduct items or you cannot. She is not used to the either or scenario that standard deductions and itemized deductions present.

She has an appointment to come to your office this week. However, she will not be alone. She will be bringing her recently naturalized parents and her brother to file their tax returns as well. They too are equally confused about U.S. tax law. Excited at the prospect of two new returns that you can charge for, you decide to create a PowerPoint presentation for the family to explain things.

Explain the following points.

• Determining net business income and how it translates to personal income
• The rules governing the difference between standard and itemized deductions