This article discusses the basic steps for completing SCH C.
Keep in mind every SCH C is different, so these instructions are not all inclusive and may not apply to every taxpayer.
About Form SCH C
Taxpayers who file Form SCH C are considered self-employed.
Self-employment in excess of $400 MUST be reported to the IRS.
Self-employment income is income received from the sale of products or services by an
individual.Taxpayers may use the same SCH C for multiple forms, as long as the work is the same type of work.
Some taxpayers may have a BOI reporting requirement, see What is the BOI Reporting Requirement?, for more information.
Who is considered self-employed?
Self-employed individuals may be any of the following,
Independent contractors: Provide contract work to other individuals and receive a 1099- NEC, 1099-MISC, or 1099-K for their services.
Sole proprietors: Operate their own business providing a service or selling goods. Keep gross receipts and records of their income and expenses.
Adding SCH C
Select Add Form.
Locate SCH C in the All Forms & Schedules Menu. Double-click to add.
If a joint return, choose New Taxpayer's or New Spouse's Occurrence
Completing SCH C
In A, enter the Principal Business or Profession. This is not the business name, but rather, a description of the type of work the taxpayer did to provide the income reported on the Schedule C.
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In B, enter the Business Code by typing it in or selecting it from the Choices list.
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If the taxpayer has a business name or employer id, enter those on C and D respectively.
Do not enter the business or employer id from their 1099 forms unless they actually own that business.
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If the taxpayer has a business address, enter it on E (if they use their home, you can transfer that information from the CD Page).
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Indicate the taxpayers Accounting method by placing an “X” in box 1 for cash method, box 2 for accrual method, or box 3 for other (which would be a hybrid of both methods).
Keep in mind this is not how the taxpayer got paid, it is how they keep their business records. Taxpayers that record payments when they are received and expenses when they are actually paid (not billed) use the cash method.
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Complete the QBID indicator. For more information regarding QBID reference What is the Qualified Business Income Deduction (QBID)?
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Complete Part I-Income. If the taxpayer has income not reported on a tax form, it will be entered on Line 1, Gross receipts or sales. Income from tax forms should be input on those forms and linked to the SCH C as needed.
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Complete Part II-Expenses as needed.
Taxpayers may claim all necessary and ordinary business expenses.
Taxpayers must report expenses accurately and should keep records to substantiate all claims.
DO NOT use SCH C to report expenses claimed from a taxpayer’s W-2 job.
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Complete Part III-Cost of Goods Sold for taxpayers who have inventories.
Inventories include items the taxpayer is selling like t-shirts, shampoo, etc. This is not the same as supplies.Complete Part IV- Information on Your Vehicle as needed. Taxpayers using the standard mileage rate, and NOT claiming actual vehicle expenses should use Part IV.
Enter business miles on 44a.
Enter commuting and other mileage for the vehicle on 44b and 44c.
Complete Part V-Other Expenses as needed.
Complete this section if the taxpayer has allowable expenses that don't fit into any of the other categories on SCH C.Enter a brief description of the expense followed by the dollar amount.
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