If you owned your own business, the IRS requires you to report any income or expenses for that business on your tax return. This also applies if you are working as a contract employee, a consultant, a self-employed individual, etc. You will report this information on your return using a Schedule C.
To create a Schedule C, please follow the steps listed below.
- Profit or Loss from Business
If you received a Form 1099-MISC (prior to tax year 2020) with income reported in boxes 5, 6, or 7, or Form 1099-NEC, box 1 (beginning with tax year 2020), you must report the income on a Schedule C. To determine why you are required to file a Schedule C please click here.
If you were to just report the income as "Other Income", the Social Security and Medicare taxes would not calculate correctly. When the IRS reviewed your return later in the year, they would find that you did not report this correctly and you would have to not only pay the self-employment taxes, but you would end up owing penalties and interest.