Make stop cuts defining the hat, beard, arm/hand, and shirt. And yes, that is a trash bag for background.
Relieve the wood up to the bottom of the hat. Remove wedges of wood from the elbow crease, and where the beard meets the shoulder. Relieve the wood up to to the bottom of the shirt. Relieve the wood around the arm and hand.
Round off the beard and the front and back of the shirt. Make stop cuts defining the side of the nose, and the top of the eye area. Remove a wedge of wood from this area beside the nose and at the top of the eye area. Shape the nose.
Whittle the Gnomes hat into a point.
Make a stop cut at the top and bottom of the mustache. Relieve the wood around the mustache, and further refine the eye area. Texture the beard, and wood burn the areas as shown. The wood burning prevents the paint from "wicking" into other colors, and helps to give overall depth to the piece after painting.