I'm not a tax expert either. I see two ways to look at this, fairness, and IRS instructions.
From a fairness point of view, if you subtract your notary fee gross income, you are subtracting both the profit and expenses of the notary part of your business. And when you complete Schedule C to figure out the profit of your entire business, you subtract all your expenses. So the part of the expenses that are due to notary work are being subtracted twice.
As far as IRS instructions go, see the instructions for Schedule SE at
https://www.irs.gov/pub/irs-pdf/i1040sse.pdf
This says
2.
Fees received for services performed as a notary public. If you had no other income subject to SE tax, enter “Exempt—Notary” on Schedule 2 (Form 1040), line 4. Don’t file Schedule SE. However, if you had other earnings of $400 or more subject to SE tax, enter “Exempt—Notary” and the amount of your NET PROFIT as a notary public from Schedule C on the dotted line to the left of Schedule SE, line 3. Subtract that amount from the total of lines 1a, 1b, and 2, and enter the result on line 3. [My capitals.]
It looks like the method that Gavina's CPA is to divide up the expenses between notary and non-notary work in proportion to how much of the gross income is notary or non-notary. That seems reasonable to me. I bet most of the forum participants would have a tough time classifying most of their expenses as strictly notary or strictly non-notary; most of them are mixed. I don't know if there's a law or rule saying the CPA's method is mandatory. |
