What Is Schedule C?
IRS Schedule C, Profit or Loss from Business, is a tax form that accompanies a taxpayer's main tax return, Form 1040 to report income and expenses for a business.
Those who are self-employed, sole proprietors of a business, or a single-member Limited Liability Company (LLC) are required to report any activity conducted for income or profit using Schedule C. The resulting profit or loss calculations are commonly considered self-employment income.
- Anyone who operates a business as a sole proprietor must fill out Schedule C when filing their annual tax return.
- A business expense must be ordinary and necessary to be listed as a tax deduction on Schedule C.
- The taxpayer uses Schedule C to calculate the business’s net profit or loss for income tax purposes.
Who Files Schedule C: Profit or Loss From Business?
Anyone who operates a business as a sole proprietor must fill out Schedule C when filing their annual tax return. A single-member Limited Liability Company (LLC) is treated like a sole proprietorship for tax purposes unless it has elected to be treated like a corporation for tax purposes. Statutory employees, independent contractors, freelancers, and self-employed individuals will all file Schedule C.
There are a few other less common scenarios that require the use of Schedule C. These include receiving income and taking deductions from certain qualified joint ventures and receiving certain income reported on Form 1099-MISC, Miscellaneous Income.
What Information Does Schedule C: Profit or Loss From Business Include?
This schedule asks about the taxpayer’s business name, product or service, business address, accounting method, gross receipts or sales, and cost of goods sold. Schedule C is also where business owners report their tax-deductible business expenses, such as advertising, certain car and truck expenses, commissions and fees, supplies, utilities, home office expenses, and many more. A business expense must be ordinary and necessary to be listed as a tax deduction on Schedule C.
Small business owners also use Schedule C to take a deduction for the use of a personal vehicle for business purposes, to report when it was placed in service for business purposes, and to report the number of miles that it was driven for business use.
How to File Schedule C: Profit or Loss From Business
Using the entries on Schedule C, the taxpayer calculates the business’s net profit or loss for income tax purposes. This figure then is transferred to Form 1040 and is used in calculating the taxpayer’s overall tax liability for the year. Taxpayers who operate more than one sole proprietorship must file a separate Schedule C for each business.
Also, sole proprietors engaged in certain lines of business may have to file other forms in addition to Schedule C. For example, landlords may need to file Schedule E to report rental income that is not subject to self-employment tax, and sole proprietors with a home office will need to file Form 8829 to claim a deduction for expenses related to the business use of their home.
Where to Download Schedule C: Profit or Loss From Business
All versions of Schedule C are available on the Internal Revenue Service website.
Do I Have to File a Schedule C If I Receive a 1099-NEC?
If you are self-employed or a contracted worker, you will receive a 1099-NEC from any business that pays you more than $600 in a year. You will need to report this income on a Schedule C.
Do I Need to File a Schedule C With No Income?
If you have no income and no deductible business expenses to report in a given tax year, you do not need to file a Schedule C for your business.
Does an LLC File a Schedule C?
If you have a single member LLC and have not elected to be treated as a corporation for tax purposes, you will file a Schedule C. It is essentially the same as a sole proprietor.
If you have a single member LLC and have not elected to be treated as a corporation for tax purposes, you will file a Schedule C.