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What Is Schedule C?
Schedule C: Profit or Loss from Business is an Internal Revenue Service (IRS) tax form used to report business-related income and expenses. Schedule C must be submitted with Form 1040, the standard tax return form. If you’re self-employed, a sole proprietors of a business, or run a single-member limited liability company (LLC), you’ll need to use this form to report income and expenses for your business. The resulting calculations determine your net profit or loss, which counts as self-employment income.
Key Takeaways
- Schedule C is a tax form used to report income and expenses for a business.
- This schedule is completed by self-employed individuals, sole proprietors, or single-member LLCs.
- Business expenses must be ordinary and necessary to qualify for deductions on Schedule C.
- Schedule C calculates the business’s net profit or loss, which is reported on Form 1040.
Who Files Schedule C?
You need to file Schedule C if you fall into one of the following categories:
There are other, less common situations where Schedule C is required. For example, you may need to file if you’re part of a qualified joint venture or receive income reported on Form 1099-MISC (Miscellaneous Income).
For tax purposes, a single-member LLC is generally treated as a sole proprietorship, unless it elects to be taxed as a corporation.
What Information Does Schedule C Include?
This schedule asks about the taxpayer’s personal information, including the business name, product or service, and business address. Taxpayers must also include other pertinent information related to their business, including:
Schedule C is also where business owners report their tax-deductible business expenses, such as advertising, certain car and truck expenses, commissions and fees, supplies, utilities, home office expenses, and many more. One important thing to note is that 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, to report when it was placed in service for business purposes, and to report the number of miles that it was driven for business use.
A business expense must be ordinary and necessary to be listed as a tax deduction on Schedule C.
How to File Schedule C
After filling out Schedule C, you calculate your business’s net profit or loss, which is reported on Form 1040. This figure impacts your total tax liability.
Using the entries on Schedule C, the taxpayer calculates the business’s net profit or loss for income tax purposes. This figure is reported on Form 1040 and is then used to calculate 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.
Sole proprietors who are 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.
All versions of Schedule C are available on the IRS website.
Do I Have to File a Schedule C If I Receive a 1099-NEC?
If you’re self-employed or a contracted worker, you’ll likely receive a 1099-NEC: Nonemployee Compensation from any business that pays you more than $600 in a year. You will need to report this income on Schedule C.
Do I Need to File Schedule C If I Have No Income?
If you have no income and no deductible expenses for your business in a given year, you are not required to file Schedule C. However, if you had business expenses, even without income, it may still be beneficial to file in order to claim deductions.
Does an LLC File a Schedule C?
Yes, if you have a single-member LLC that is not taxed as a corporation, you must file Schedule C. For tax purposes, the IRS treats a single-member LLC like a sole proprietorship unless the LLC elects otherwise.
The Bottom Line
If you are self-employed, run a business as a sole proprietor, or have a single-member LLC (not taxed as a corporation), you must file Schedule C to report income and business expenses. The net profit or loss calculated on this form will affect your overall tax bill. Be sure to include Schedule C with Form 1040 every year you file your taxes.
