verifing self employed

[Magdalen Lagergren]

what should a land lord look for in  the tax returns of a self employed person  net or gross

[Linda Weygant]

As always, the answer is: "It Depends"

Start with gross and then look to see if there are Cost of Goods.  If so, you'll want to subtract the Cost of Goods sold from the reported Revenue.  This is because the Cost of Goods sold is mandatory for the person to produce that income.  If they don't spend the COGS, there is no revenue.

Next, look at the following expenses and zero them out (pretend they are not expenses)

Telephone

Internet

Vehicle Expenses

This is because these are common expenses that everybody has.  The self employed folks get to deduct them though.

Lastly, zero out Depreciation Expense.  This is a non-cash expense and is for the ongoing allocation of costs to large purchases that are usually purchased in prior years.