Schedule C – Self Employment

If you’re a self-employed business, the IRS requires you to file the Form Schedule C along with your annual return Form 1040. The title of the Form Schedule C is “Profit or Loss from Business”. As the name suggests, this form reports the revenue and expenses of a sole proprietorship to the IRS.

Who Is Supposed To File Schedule C?

· Sole Proprietor: Usually, small business sole owners do not register with the state as a LLC or corporation and hence, must pay income tax along with the Form Schedule C.

· Single-Member LLC: If the single member corporation or LLC chooses not to pay taxes as a corporation or LLC, then it will have to pay taxes by filing the Form Schedule C.

Reporting of Schedule C:

Schedule C is structured into five parts as follows:

Part I: Income

This is where you calculate your gross profit by reporting revenue and then subtracting the cost of goods sold from it.

Part II: Expenses

Report your business expenses as given in the form. Use the various categories provided to specifically report all expenses incurred. After deducting the sum of expenses from gross profit calculated in Part I, you will derive the net profit.

Part III: Cost of Goods Sold

This section allows you to accurately calculate the cost of goods sold during the tax period.

Part IV: Information on Your Vehicle

This section isn’t for calculation but to provide information about any vehicles used in the business such as business driving mileage, commuting mileage, and more.

Part V: Other Expenses

All expenses that couldn’t be included in part II are reported under this part of Schedule C.

Self-employed small businesses are obliged to report this form in order to file their tax returns and pay tax bills. It is necessary to accurately file the Schedule C form because inaccuracy in tax forms can lead to penalties.

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