Schedule C, also known as Form 1040, is an IRS form that sole proprietorships can use to record profits and losses when they file their taxes.
You can learn more about the form by reading the Schedule C instructions below.
Schedule C Instructions:
1. Enter your business information.
It is important that you enter your business information accurately in the first section of the form. This will help the IRS to identify your sole proprietorship. This includes your social security number and employer ID number (if you have one).
The bottom of the first section has a short questionnaire that asks you to provide more information about the age and operating status of your business.
2. Record income and expenses.
In part one and part two, you will need to enter detailed information about your income and any income-related expenses. As you are working through these sections, you will want to make sure that you have access to your accounting software, or to a ledger that you can reference to locate all of the financial information that you need.
3. Deduct the cost of goods sold.
The IRS allows you to deduct the cost of goods sold from your business income. This is a key way for you to lower your income taxes. Essentially, the cost of goods sold refers to that amount of money that it cost you to obtain goods that you sold for a profit. That cost is deductible when it comes to the purchases and labor involved.
4. Enter additional expenses.
The final two sections of the form all you to enter vehicle expenses and any other expenses that you may not have been able to list elsewhere. If you intend to write-off vehicle expenses, you will need to enter mileage details. It's best to keep a driving log so that you can track your business-related travel and record it accurately on Schedule C.
5. Submit Schedule C.
Once you have totaled all of your expenses, you can submit Schedule C with your tax return. The IRS can use this document to verify the income and expenses of your sole proprietorship. Remember to keep all of your receipts and invoices in case you are audited, and keep a copy of Schedule C for your own reference.
Schedule C FAQs:
Is there a Schedule C calculator?
You can use the Schedule C calculator at selfemployment-taxcalculator.com to calculate the basic income amount that you will find after subtracting your expenses from your revenue.
Do I need to use Schedule C for my taxes?
Schedule C is for sole proprietorships. If you have a business and you are the sole proprietor, then you must use Schedule C.
Is IRS Schedule C the same as Form 1040?
Schedule C is a subsection of Form 1040, which is the IRS tax return form for individuals.
Does the IRS offer any additional instructions for filing Schedule C?
The IRS has an official publication that provides detailed intructions and definitions for each section of Schedule C. The document also explains Schedule C expenses. You can access the instructions here: www.irs.gov/pub/irs-pdf/i1040sc.pdf.