Schedule C: Do you need to file one this tax season?

If you alone or with your spouse run a business, it’s likely you’ll file a Schedule C (Form 1040) to report the income. Learn all about this popular tax schedule here.

Among all tax forms for small businesses tax forms for small businesses, self-employed business owners are often familiar with the Schedule C – and for good reason. This is the default form for sole proprietors, single member LLCs, and qualified joint ventures.

What is IRS Schedule C?

Schedule C: Profit or Loss from Business reports how much income you made or lost in a business.

IRS Schedule C reports:

  • Taxable business income
  • Whether your business has a profit loss or gain

The form is part of your personal tax return—Schedule C is typically filed with Form 1040.

Long story short, the profit or loss you make on your business flows through (is reported) in your personal income tax return. And Schedule C is the go-to tax form to help you make those calculations.

Who files a Schedule C Tax Form?

If you’re wondering who files a Schedule C Tax Form, the answer is not everyone. It all depends on your business structure. So, if you own a business and it’s a:

  • Sole proprietorship (Not registered as an LLC or corporation—this is the default if you haven’t incorporated your business)
  • Single member LLC (If you don’t elect to file as a regular corporation or an S corporation)
  • Qualified joint venture (If you opt not to file partnership forms, spouses can file two Schedule C forms)

Who doesn’t file the Schedule C Form?

Employees or business entities not listed above will not use IRS Schedule C. Neither will hobbyists (someone not looking to make a profit on their hobby). Employees should receive a W-2 form and report the income on their Form 1040. Business entities such as partnerships and corporations use different IRS forms.

Schedule C tax instructions

Filling out a Schedule C? For those who need to file a Schedule C, have the information below handy. If certain sections/lines don’t apply to your business you can skip them (for example: if you don’t carry inventory, you won’t need inventory records or to complete Part 3).

  • Your name (and your business’)
  • Accounting method (Cash, accrual, or other)
  • Address
  • Business expenses, like advertising costs, mileage and other business tax deductions
  • Cost of goods sold
  • Employer Identification Number (EIN)
  • Social Security number
  • Gross receipts or sales
  • Inventory records
  • Product or service activity

To summarize, the top of the Schedule C has you fill out important information about your business.

Then, in Part 1, you’ll determine your gross income through line items like gross receipts or sales, returns and allowances, cost of goods sold, and other income calculations.

In Part 2, you’ll report your business expenses (as applicable) and calculate your total business expenses before business use of home. In this section, you can easily delineate your business deductions. The last few lines on Part 2 help you determine your total expenses, expenses for business use of home, tentative profit or loss, and net profit or loss.

Part 3 helps you determine your cost of goods sold.

Part 4 includes a section where you can report certain information on vehicle use for your business. If you don’t use a vehicle in your business, you don’t need to report any vehicle information.

Part 5 lists business expenses that don’t fit within Part 2. This includes things like cell phone and internet deductions, bank charges, and other miscellaneous deductions.

Once you complete your Schedule C tax filings, you’ll want to report your net profit or loss on your personal tax return, on Form 1040. This line also helps you determine your overall taxable amount to then calculate self-employment taxes on Schedule SE.

Get help filing IRS forms and Schedule C

Small business tax forms, like the IRS Schedule C, are critical to determining your business’ taxable income or losses—and at the end of the day helps you determine your business’ overall vitality. Whether you don’t have the expertise or time to do your taxes, get help to do it right from our team of small business certified tax pros.  

Make an appointment today.

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