What Do I Need to Know to File Schedule C?
Are you using Schedule C to file your business taxes? Small business owners who are filing business taxes as a sole proprietorship or single-member LLC must file using Schedule C - Profit or Loss from Business. Learn about the changes to Schedule C for the current tax year, how to prepare and how and where to file.
What is Schedule C?
What are the changes in Schedule C for 2018 Taxes?
- The 2017 Tax Cuts and Jobs Act has made several changes that affect small businesses. Read about the benefits and drawbacks to businesses from this new legislation.
- Form 1040 has been revised. The total taxable income from Schedule C is now filed on a new Schedule 1, Line 12.
- Employer ID for single-member LLC. The IRS has changed the employer ID (EIN) requirement for Schedule C. Businesses set up as single-member LLC's must use the EIN issued to the LLC, not the EIN issued to you in your name "as a sole proprietor."
- Mileage rate. On line 9, use the standard IRS business mileage rate for 2018 (53.5 cents a mile) for business driving) to calculate business mileage deductions.
Who must file Schedule C?
If you operate your business as a sole proprietorship (that is, you have not designated a legal business entity like an LLC, corporation, or partnership), you must complete a Schedule C. If you operate your business as a single-member limited liability company (LLC), you also use Schedule C for your business income taxes.
Where do I get information for completing Schedule C?
Before you begin to work on your Schedule C, you will need to gather certain end-of-year business information. You will need:
- A profit and loss statement (sometimes called an income statement) showing the entire year of 2013
- A balance sheet for the year ending December 31, 2013
- Statements about assets showing purchase of assets in 2013
- Information on inventory to prepare a cost of goods sold calculation if your business sells products
- Details on travel and car/truck expenses, meals and entertainment expenses, and home business expenses.
Read more about the details of the information you will need to prepare Schedule C.
In general, you will first complete the cost of goods sold section and calculate gross income. Then you will list allowable deductions. Deductions are subtracted from gross income to get a net income.
How do I file Schedule C?
Beginning with 2018 tax returns, the information on your net business income from line 31 of your Schedule C is added to your personal tax return on Schedule 1, Line 12: Business Income or Loss. This income is included with all other income sources to determine your total adjusted gross income tax liability for that year's taxes. Read more about including Schedule C on your personal tax return.
Can I file business taxes using Schedule C-EZ?
Smaller businesses may be able to use Schedule C-EZ. The IRS says: small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. Learn more about Schedule C-EZ and how to complete it.
Must I file a Schedule C for each business I own?
Yes, Schedule C is used to report the net income from one business. So if you have several small businesses that use Schedule C, you must complete this form for each business. Then, net income from totals all Schedule C's are added together on Schedule 1, Line 12 of your personal tax return.
How do I complete Schedule C for a husband-wife partnership?
The husband-wife partnership is a special case. Partnerships must use Form 1065 to report partnership income, but in certain circumstances, a husband-wife partnership may become a qualified joint venture and file taxes using two Schedule C forms (one for each spouse). Check with your tax advisor before attempting to file as a qualified joint venture. Read more about how to complete Schedule C forms for a husband-wife partnership.
How do I correct a mistake on Schedule C?
To correct an error in Schedule C, you will need to file a corrected Schedule C as part of an amended personal tax return, using form 1040x. Read more about how to file Form 1040x.
The net income information on Schedule C is used to determine the amount of self-employment tax you owe (for Social Security/Medicare taxes); Schedule SE is used to calculate the self-employment tax amount. Schedule SE is a complicated form (even the simple version), so you may want to get help from a tax professional or use a tax preparation software program that includes business income.