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Schedule C, Profit or Loss from Business: What it is and who has to file one

6 min read

6 min read

Self-employed persons (including single-member LLCs) and independent contractors, or freelancers, (whatever term you use), self-employed individuals have additional responsibilities each tax year. Don’t worry — this isn’t a job you must do alone. We’re here to make understanding common tax forms — like the Schedule C — more digestible.

What is Schedule C?

Schedule C: Profit or Loss from Business reports how much money you made or lost in a business you operated as a gig worker, freelancer, small business owner, or consultant in certain business structures. The form reports how much of the income from your business is included in your gross income or whether you have a tax loss to report to the Internal Revenue Service (IRS).

Who files a Schedule C tax form?

Schedule C tax form

If you’re self-employed and set up your business as a sole proprietorship (not registered as multi-member LLC or corporation) or single-member LLC taxed as a sole proprietorship, you should file Schedule C with your Form 1040 to report the profit or loss for your business.

Additionally, the activity is qualified as business activity if it’s done regularly and continually with the intent to make a profit. If your activity doesn’t rise to the level of business activity then you don’t need to file Schedule C to report income from a hobby. However, figuring out if your hobby is truly a hobby — and not a business can be tricky. Find out more about the difference between hobby vs. business income.

Do you still need help with your Schedule C Tax Form and how it affects your taxes? Check out our Guide to Gig Worker Taxes.

Does an LLC file a Schedule C?

A single-member LLC, that has not elected to be treated as a corporation, uses the Schedule C to report profit or loss from the business. The LLC is a business structure allowed by state statute for other legal purposes but is disregarded for tax purposes. Because LLCs are formed in the state, each state has different laws and regulations. Therefore, it is important to learn about your state regulations regarding an LLC.

You are generally required to file a Schedule C tax form even if you have a loss. This is especially the case if your business received a 1099 or some other informational form.

Schedule C instructions

To fill out your Schedule C, you’ll need to gather information related to your business for the tax year. Schedule C collects the following information:

  • Accounting method (Cash, accrual, or other)
  • Address
  • Business expenses, like advertising costs, mileage and other self-employed tax deductions (receipts or list)
  • Business income
  • Cost of goods sold (COGS)
  • Employer Identification Number (EIN)
  • Gross receipts or sales
  • Inventory records, if applicable
  • Mileage driven for business purposes, as well as other vehicle business expenses
  • Product or service activity
  • Social Security number (SSN)
  • Your business name
  • Your name

How to fill out the Schedule C form

Filling out a Schedule C? For those who need to file a Schedule C, follow these important steps.

Step 1 – Start by filling out the Schedule C with the top section by filling out important identifying information.

Step 2 – Fill in the appropriate sections that relate to you / your business. The Schedule C tax form has five parts. If certain sections/lines don’t apply to your business, you can skip them.

  • Part 1 determines your business’ gross income through line items like gross receipts or sales and other income calculations.
  • Part 2 calculates and reports business expenses before home office deductions. This section also helps you figure out total expenses, expenses for business use of home, tentative profit or loss, and net profit or loss.
  • Part 3 helps you determine your cost of goods sold, or COGS.
  • Part 4helps you report business vehicle use. If you don’t use a vehicle in your business, you can skip over this section.
  • Part 5lists business expenses that don’t fit within Part 2. This includes cell phone and internet deductions, bank charges, and miscellaneous deductions. This line also helps you determine your overall income amount to calculate self-employment taxes on Schedule SE.

Step 3 – Once you complete your Schedule C, report your net profit or loss on your personal tax return, Form 1040. For this reason, this tax form is often referred to as 1040 Schedule C.

Where can you get Schedule C?

You can find and download all ‌versions of Schedule C on the IRS website. You can also use H&R Block Online, to access Schedule C and complete your tax return. Or if you work with a tax preparer, they will help you access and complete Schedule C.

Other forms to complete along with IRS Schedule C

Usually, self-employed or independent workers who file a Schedule C tax form will also have to file a Schedule SE tax form for self-employment tax. Form 4562 also might be required to claim depreciation or Form 8829 to claim actual expenses from business use of your home.

Schedule C EZ (for tax years before 2019)

Some people still inquire about Schedule C EZ, but beginning with the 2019 tax year, its longer available, leaving only IRS Schedule C. For tax years prior to 2019, as a sole proprietor, you could use a simpler version of Schedule C called Schedule C-EZ. This form didn’t include much of the detail in the full Schedule C and just asked for your total business receipts and expenses.

More help with IRS Schedule C and small business taxes

Business tax forms, like the IRS Schedule C, can get tricky without a little guidance. But don’t fret—we’re here to help!

Self-employed or independent contractors: Gain control of your taxes and get every credit and deduction you deserve. File with H&R Block Online Deluxe (if you have no expenses) or H&R Block Self-Employed Online (if you have expenses).

Full-time small business owners: If your self-employment income is more of a full-time business, you can rely on our team of small business certified tax pros to get your taxes right and keep your business on track. Find out how Block Advisors can help with your small business taxes.

Our small business tax professional certification is awarded by Block Advisors, a part of H&R Block, based upon successful completion of proprietary training. Our Block Advisors small business services are available at participating Block Advisors and H&R Block offices nationwide.

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