What Is Schedule C?
Schedule C: Profit or Loss from Business is an Internal Revenue Service (IRS) tax form that is used to report income and expenses for a business. Schedule C must accompany Form 1040, which is a taxpayer's main tax return. Self-employed individuals, sole proprietors of a business, or a single-member limited liability company (LLC) must report any activity conducted for income or profit using Schedule C. The resulting profit or loss calculations are commonly considered self-employment income.
Key Takeaways
- Schedule C is a tax form used to report business-related income and expenses.
- This schedule is completed by self-employed individuals, sole proprietors, or single-member LLCs.
- A business expense must be ordinary and necessary to be listed as a tax deduction on Schedule C.
- The taxpayer uses Schedule C to calculate the business’s net profit or loss for income tax purposes.
- Schedule C must be filed with Form 1040.
Who Files Schedule C: Profit or Loss From Business?
As noted above, the following people must complete Schedule C when filing their annual tax return:
- Self-employed individuals, including freelancers, independent contractors, and statutory employees
- Anyone who operates a business as a sole proprietor
- A single-member LLC
There are a few other less common scenarios thatrequire the use of Schedule C. These include receiving income and taking deductions from certain qualified joint ventures and receiving certain income reported on Form1099-MISC: Miscellaneous Income.
A single-member LLC is treated like a sole proprietorship for tax purposes unless it elects to be treated like a corporation for tax purposes.
What Information Does Schedule C: Profit or Loss From Business 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:
- The preferred accounting method
- Gross receipts or sales
- Cost of goods sold (COGS)
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: Profit or Loss From Business
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.
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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.
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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 are self-employed or a contracted worker, you will 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.
I Have No Income. Do I Need to File a Schedule C?
If you have no income and no deductible business expenses to report in a given tax year, you do not need to file a Schedule C for your business.
Does an LLC File a Schedule C?
If you have a single-member LLC and have not elected to be treated as a corporation for tax purposes, you must file a Schedule C. It is essentially the same as a sole proprietor.
The Bottom Line
File Schedule C if you have to report business-related expenses and income as part of your annual tax return if you are self-employed, run a business as a sole proprietor, or have a single-member LLC that isn't treated as a corporation. Reportable income includes dollars earned through bartering. The information on this form must be included on and accompany Form 1040 each year you file.
