Schedule C

Profit or Loss From Business (Sole Proprietorship)

Purpose

Schedule C is used by sole proprietors and single-member LLCs to report income or loss from their business as part of their individual tax return.

Who Must File

• Sole proprietors
• Single-member Limited Liability Companies (LLCs) that haven't elected to be treated as corporations
• Independent contractors and freelancers

Key Sections

1. Business Information: Name, address, accounting method, and business codes
2. Income: Gross receipts, returns, and allowances
3. Cost of Goods Sold: For businesses that maintain inventory
4. Expenses: Detailed listing of various business expenses, including:Advertising
5. Net Profit or Loss: Calculation of the business's bottom line

Important Considerations

• Must be filed with Form 1040
• Requires detailed record-keeping of all business income and expenses
• May need to be accompanied by other forms, such as Form 4562 for depreciation
• Self-employment tax is calculated based on the net profit reported on Schedule C

Benefits

• Allows business owners to deduct legitimate business expenses
• Provides a clear picture of business profitability
• Helps in tracking business performance year over year