1040 form for small business
3 min read
March 24, 2021 • Block Advisors
Form 1040 is familiar to most individual taxpayers as it’s the tax form required for U.S. citizen and resident individuals who receive income. However, it can also be used by these taxpayers to file a return for small business income.
Read on to hear about this tax form, along with its use for small businesses.
Form 1040 for small business use
A few years ago, you may have noticed a new look to Form 1040. Starting with tax year 2018, a simplified Form 1040 replaced Forms 1040, 1040A and 1040EZ. However, the simplified Form 1040 includes several supporting schedules.
Certain businesses and most individuals use the Form 1040 including those who are self-employed, sole proprietorships, rental real estate owners, and owners with pass-through income from S corporations and partnerships.
Details on the Form 1040 changes and corresponding schedules
With the simplified form, comes tax schedules as well, some of which may need to be filed with your Form 1040. You only need to file the schedules that pertain to your business’ tax situation.
Existing schedules, such as the Schedule A, Itemized Deductions, or Schedule C, Profit or Loss from Business haven’t changed. Here’s a reminder of what they are and how they’re used for business purposes:
Schedule A reports itemized deductions
Schedule B reports interest and dividend income
Schedule C reports business revenue, expenses, and profit (or loss). Use Schedule C if you’re:
- A sole proprietorship
- A single-member LLC
- A partner in a partnership
- Report farm income
There’s also the Schedule C EZ, Net Profit from Business (Sole Proprietorship), which can be used instead of Schedule C by qualifying small businesses and statutory employees with expenses of $5,000 or less.
Schedule D reports asset sales procured from capital gains or losses — and posts to Schedule 1 (see below for details on Schedule 1)
Schedule E reports income or loss from rental real estate, partnerships, S corporations, royalties, trusts, estates and residual interests in real estate mortgage investment conduits (REMICs).
Schedule F reports the amount of gross income from a farming business.
Schedule SE calculates self-employment tax due on net earnings for the self-employed.
There are three numbered schedules associated with Form 1040. The 1040 schedules you may need to file as a small business owner or self-employed person are:
Schedule 1 – Additional income and adjustments to income
This schedule is used to report income or adjustments to income that can’t be entered directly on Form 1040; including:
- Business Income or (loss) (Also use Schedule C and attach)
- Capital gains and losses
- Unemployment compensation
- Self-employed business deductions
- IRA and HSA contributions
- Adjustments to income
Schedule 2 – Additional taxes
Use Schedule 2 if you owe alternative minimum tax or need to make an excess advance premium tax credit repayment.
This schedule reports self-employment tax, additional taxes on retirement distributions, and other miscellaneous taxes.
If you make estimated tax payments or are applying an underpayment from the previous tax year, use this schedule.
Schedule 3 – Additional Credits and Payments
This schedule is used to claim credits such as the general business credit and foreign tax credit.
You’ll include each schedule to Form 1040 and send them to the IRS. You should file Form 1040 and other tax forms by the tax deadline.
Need help with Form 1040 for your small business?
Whether it’s the recent Form 1040 changes or simply the number of schedules associated with Form 1040, it’s understandable that busy business owners can feel overwhelmed by this and other tax forms. Don’t feel prepared to handle small business taxes yourself? Leave it to the small business certified pros at Block Advisors to help.
We’ve helped millions of small business owners and self-employed people do more of what they love by doing what we do best.