A Schedule C (Profit or Loss From Business) is used to report income and expenses from a business you operate as a sole proprietor. Even if you don't think of yourself as a business owner, you may still need to file a Schedule C if you're self-employed or earn income outside of a traditional employer-employee relationship.
Common examples include:
- Independent contractors
- Freelancers
- Consultants
- Gig workers
- Rideshare drivers
- Online sellers
- Self-employed individuals
For example, if you earn money selling products through eBay, Etsy, Amazon, or a similar platform, that income is generally reported on a Schedule C.
What Does Schedule C Report?
Schedule C is used to calculate your business profit or loss by reporting your income and deductible business expenses.
The form is divided into several sections:
Part I: Income
Part I reports the income earned from your business.
Examples include:
- Payments reported on Form 1099-NEC
- Business-related Form 1099-K income
- Cash sales
- Payments received for services
This section calculates your gross income from the business.
Part II: Expenses
Part II is where you enter your ordinary and necessary business expenses.
Examples include:
- Advertising
- Supplies
- Insurance
- Professional fees
- Office expenses
- Utilities
- Contract labor
These expenses are subtracted from your business income to determine your profit or loss.
Parts III Through V: Additional Business Information
These sections are completed only when they apply to your business.
Part III: Cost of Goods Sold
Used when your business maintains inventory or sells products.
Part IV: Vehicle Expenses
Used to report business vehicle information and calculate car and truck expense deductions.
Part V: Other Expenses
Used to report deductible business expenses that don't fit into the standard expense categories listed in Part II.
What Is Self-Employment Tax?
When you work for an employer, Social Security and Medicare taxes are typically split between you and your employer.
When you're self-employed, you're responsible for both portions through self-employment tax.
Self-employment tax helps fund:
- Social Security benefits
- Medicare benefits
In general, if your business earns $400 or more in net profit, the IRS requires you to file Schedule SE to calculate your self-employment tax.
The good news is that you don't have to prepare Schedule SE separately. When you enter your Schedule C income and expenses, the program automatically generates Schedule SE if it's required.
Why Is Schedule C Important?
Schedule C not only reports your income, but it also allows you to claim eligible business deductions.
By reporting your business expenses, you may reduce:
- Your taxable income
- Your self-employment income
- Your self-employment tax
Accurate reporting helps ensure you're paying the correct amount of tax while claiming the deductions you're entitled to receive.
How Do I Enter a Schedule C in the Program?
To create or edit a Schedule C:
- Go to Federal
- Choose Income- Select My Forms
- Profit or Loss From Business (Schedule C)
From there, you'll enter information about your business, income, and expenses. The program will automatically perform the necessary calculations and generate any related forms, including Schedule SE when applicable.
Additional Information
Please refer to these articles for specific information for each section of the Schedule C: