Published on March 16th, 2022 | by Yelizaveta Zdrazhevska0
Brief Schedule C Instructions and Handy Tips
If you have a small business, work as a freelancer, or are otherwise self-employed, you might need a Schedule С Income or Loss From Business form to pay your taxes. Here you will find a simple explanation for the “what is a 1040 Schedule C form?” question and understand how to sign Schedule C form.
What Is Schedule C: Profit or Loss From Business?
Schedule C Profit or Loss From Business tax form is also known as Form 1040. It is used by the self-employed and sole proprietors to report the last year’s income and loss to the IRS. Thus, the IRS estimates the amount of taxable income and calculates the taxes you need to pay. You need to submit this form if you plan to earn any profit from your small business or freelance. You also need it to take account of the activities of your small business.
Who Has to File a Schedule C for Form 1040?
You should complete the Schedule C for a 1040 form if you gain any profit from being self-employed or having an LLC that includes one member. This form is also applicable for a husband-wife business, in which case you have to fill out two Schedule C forms instead of the partnership form.
You also need this tax form if you have a regular job and a side gig. Here are the cases when you have to complete the Schedule C Form having a side gig:
- according to the IRS, you need it for tax purposes if you have a regular gig and have intentions to make money from it;
- if one of your side gigs is related to farming, you most likely will need to submit the Schedule F;
- if the gig relates to your royalties or rental income, you should complete Schedule E.
Schedule C Form 1040 Instructions
Schedule C for Form 1040 consists of five parts for providing information about your income and expenses. Since there are different types of businesses, you do not need to fill out all the fields, only those that relate to yours. You can find this tax form on the official IRS website or use the online service with a convenient editor to fill out the form. To complete the Schedule C, you need to provide information about your income and other details for the tax year:
- how much you earn from your business during a tax year;
- a list(s) or receipt(s) of your business expenses;
- data about the commercial use of your vehicle;
- inventory details if it is related to your type of business.
After gathering the required information, you have to complete each of the 5 sections of the form. Follow the next steps:
- Part 1. Indicate the income that you receive from your business and calculate your gross income here.
- Part 2. Enter the net profit or net loss. To do this, subtract your expenses from your gross income. Indicate this figure in your income tax return form.
- Part 3. Depending on the type of your business, enter the cost of goods you sold.
- Part 4. If you used a vehicle for commercial purposes, provide the information about it.
- Part 5. This is an additional field for eligible expenses. Here you can provide information, which you didn’t include in part 2.
After following the Schedule C instructions and completing the form, you should check the correctness of the information and proceed to the next step, which is submitting the form.
How to File Schedule C?
To submit the Schedule C form, you need to attach it to the tax return form. Carry the figure of net profit or loss from Part 2 of Schedule C to line 12 of your tax return, also known as Form 1040.
When to file Schedule C form? Schedule C serves as an attachment to tax form 1040 each year. You can file the form online using the official IRS website or with the help of a tax professional. Usually, these forms should be submitted on April 15 of the tax year. If April 15 does not fall on a working day, you should submit the document on the nearest working day.
Do I Have to File a Schedule C if I Receive a 1099-NEC?
Nowadays, many companies tend to hire employees who are not listed as employees but are freelancers or work under a contract. Form 1099-NEC is a way for a self-employed person to report their income to the IRS. This form was created to replace the standard Form 1099-MISC.
If you are self-employed or work under a contract and receive about $600 or more, you must complete Form 1099-NEC. Afterward, you need to enter the income received on Schedule C.
If you are self-employed or a business owner, this form must be in your working arsenal. To avoid tax problems, be sure to submit the form by April 15th. We hope you have found this article helpful.
Based on article by pdfliner.com