Anyone who operates a business as a sole proprietor must fill out Schedule C when filing his or her annual tax return. IRS form Schedule C accompanies the main tax return form, 1040, for taxpayers who must report a profit or loss from their business. 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. This form is also where business owners report their tax-deductible business expenses, such as advertising, 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 and to report when it was placed in service for business purposes and the number of miles it was driven for business use.

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. 

There are a few other less common scenarios that require the use of Schedule C. These include earning wages and incurring expenses from being statutory employee, receiving income and taking deductions from certain qualified joint ventures, and receiving certain income reported on Form 1099-MISC, Miscellaneous Income. 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.


  1. When do I need to file an IRS Schedule F form?

    If you are a farmer, your farming business may require you to file a Schedule F with the IRS. Read Answer >>
Related Articles
  1. Small Business

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  2. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  3. Taxes

    Partnership Tax Filing Deadline is Now March 15th

    The deadline is now a month earlier than last year, but you can still file for an extension.
  4. Small Business

    6 Tax Season Tips for Entrepreneurs

    Here are several tips for small business owners to meet their tax compliance needs.
  5. Taxes

    Business Taxes: Not Paying More Than You Have To

    If you're a small business owner, note these potential tax deductibles so that you don't pay taxes that could have been extra revenue in your account.
  6. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  7. Taxes

    Filing Taxes As A Freelancer

    This is different than filing as a regular employee. Find out what you have to do and how much you have to pay.
  8. Taxes

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  1. Schedule A

    Schedule A is a U.S. income tax form that is used by taxpayers ...
  2. Form 3903

    A tax form distributed by the Internal Revenue Service (IRS) ...
  3. IRS Publication 535 - Business Expenses

    A document published by the Internal Revenue Service (IRS) that ...
  4. Itemized Deduction

    Taking itemized deductions allows taxpayers who qualify to deduct ...
  5. Form 2106: Employee Business Expenses

    A tax form distributed by the Internal Revenue Service (IRS) ...
  6. Amended Return

    An amended return is a return filed in order to make corrections ...
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center