IRS Form Schedule C: Guide for Sole Proprietors

Often, tax forms are supplemented by various Schedules. They make standard documents more flexible and suitable for different situations. One of the most commonly used forms is 1040, which has a total of 13 Schedules. In this article, you will learn what the IRS Schedule C Form is used for and how to fill it out correctly.

What Is a Schedule C?

IRS Form Schedule C, which is also known as Profit or Loss from Business, is an addition attached to the tax return. It was designed for private entrepreneurs and sole proprietors to report financial income or losses from their businesses. This two-page document is used to calculate expenses and revenue based on goods sold, utilities paid, vehicles used, and so on.

Who Files IRS Schedule C?

In short, any single entrepreneur who is not associated with any company or group business should complete it in the annex to the main tax return. If you manage several firms simultaneously, you need to complete the Schedule C IRS Form for each. At the same time, financial receipts from your enterprise should be regular; otherwise, you should not use this template. If you manage your company in partnership with your spouse (no other third-party owners), both of you should complete the document. The IRS also has an extensive list of Statutory Employees (independent contractors) who should also use this form.

What Is a Sole Proprietor?

The IRS defines a sole proprietor as a person who owns and operates a business alone or in partnership with a spouse. An LLC can also be considered such a form of business if a single owner decides to treat it that way. The purpose of such activity should be to generate income.

Is Schedule C Only for the Self-Employed?

The primary placeholders for 1040 Schedule C are self-employed and independent contractors, as described in the previous paragraph. However, it can also be used by those who work as full-time employees. They should have regular income from side gigs, i.e., activities considered by the IRS as private businesses.

How to Fill Out Schedule C

Completing this form requires you to do some simple calculations. Be careful to avoid making a mistake and not get a fine.

1. Enter your business information, company name, SSN, EIN, and so on, and answer a few simple questions about the activity.
2. Determine gross profit and income based on the total amount received for the reporting period and the number of items sold.
3. List all expenses for the current year. These can be advertising, mortgage, office, utilities, logistics, repairs, and more. If you work from home, rent, electricity, and other things can be included in these business costs too.
4. Now calculate net income. To do it, you need to subtract spending from the total revenue (taking into account saving for the future). Income tax will be calculated on this amount.
5. Part III is given to you so that you can calculate the cost of services or goods you provided or sold during the reporting period.
6. In Part IV, you need to enter all the details of the vehicles used in the business and the associated costs. It should be noted if a car was also used for personal purposes.
7. Part V is an empty field in which you can list the costs not included in the previous paragraphs. If there are none, just leave this item blank.

The 1040 Schedule C Form does not have a signature field because it is an attachment to the main document that you must sign. The completed Schedule C should be attached to Form 1040 and submitted directly to the IRS. You can do it online using PDFLiner fillable templates or fill out a form on the Free File platform from the IRS. The tax service recommends sending documents electronically rather than by mail to avoid delays in processing.

Schedule C Due Dates

Your profit or loss from business should be submitted with the main tax return form. The filing dates for these documents may differ depending on the type of business entity:

• Sole proprietors need to submit their papers on April 15th.
• Partnerships and S corporations have a deadline on the 15th day of the third month of the reporting year. That is, for example, they should prepare documents by March 15th if the tax year ends December 31st.
• C corporations and estate and trust tax returns have a deadline on the 15th of the fourth month of the reporting year. If their tax year ends December 31st, papers should be filed by April 15th of the following year (as for sole proprietors).

Please be aware that late submissions will result in penalties. If, for some reason, you do not have time to fill them in on time, request an extension for six months.

The Bottom Line

Schedule C is an essential part of your paperwork as a business owner, so you should be very careful when filling it out to take into account all the nuances. Do not worry if you make a mistake; there is Form 1040-X to fix it. But we hope you won’t need it with this comprehensive guide.