What is an IRS Schedule C form?

For many Americans, tax season is a simple ritual receiving a W-2plugging numbers into the software and waiting for a refund.

But for the millions of freelancers, side workers and small business owners out there, the process involves more heavy lifting. And at the heart of it all is Agenda C.

Schedule C is the bridge between your business and your personal tax return. Understanding how it works not only helps you stay compliant with the IRS, but helps you keep more money by correctly reporting your income and claiming all the deductions you’re due.

Here’s everything you need to know.

Schedule C is an attachment to your Form 1040. Its main purpose is to report the income you earned and the business expenses you incurred during the tax year.

The IRS then uses this form to determine your net gain or loss:

If your business earned more than it spent, you have a net profit, which is added to your other income on Form 1040 and taxed accordingly.
If your business spent more than it earned, you have a net loss, which can often be used to offset other income, potentially reducing your overall tax bill.

Schedule C determines the business profits used to calculate self-employment tax. Because an employer does not withhold Social Security and Medicare taxes (also known as FICA taxes) from your paycheck, you must cover both the employee and employer portions of the benefits you report on your Schedule C.

Deductions are the regular costs of running your business. Subtract them from your gross income and you can reduce your taxable profit.

Given the additional tax burden self-employed people face, paying both employer and employee FICA taxes, you’ll want to claim as many deductions as you can to lower your tax bill.

Common cancellations include:

Advertising: Business cards, social media ads, website hosting.
Car and Truck Expenses: Deduct the business use of your vehicle using the standard mileage rate or actual costs such as gas, repairs and maintenance.
Fees and commissions: payments to contractors or processing fees from platforms like Stripe or PayPal.
Office expenses: supplies such as paper, ink and postage.
Insurance: Coverage such as professional liability insurance or business property insurance.
Travel and Meals: Business travel costs and generally 50% of qualifying meal costs.
Home office: If you use part of your home exclusively for work, you can deduct a portion of your rent, mortgage interest, and utilities.

Be sure to keep your receipts throughout the year. You don’t send them with your return, but you need them on hand in case of an audit by the IRS.

Typically, you must file Schedule C if you own a business or practice a profession as a sole proprietor or single-member LLC.

The IRS considers an activity a business if you carry it on primarily for profit and do so “continuously and regularly.” This covers freelancers, independent contractors like consultants, and most gig workers, including rideshare drivers and delivery couriers.

Even as a side hustle, you likely need to file if your net earnings exceed $400. This includes things like selling crafts online or flipping furniture on the weekends.

Statutory employees, who are treated as Social Security and Medicare employees but can still deduct business expenses, also use Schedule C to report their income and expenses.

Filling Agenda C is mostly about staying organized. Use this workflow to keep everything neat and accurate:

Collect your records: Collect all 1099 forms (such as 1099-NEC or 1099-K), bank statements, and expense receipts.
Calculate your gross income: Enter all the money your business brought in. This includes all cash, check and credit card payments, not just what was reported on 1099s.
Calculate your cost of goods sold (COGS): If you sell products, you’ll need to know your beginning inventory, what you bought during the year, and your ending inventory.
Break down your expenses: Go to Part II and fill in your totals for each category. Be honest but thorough.
Determine your net profit or loss: Subtract your total expenses (and COGS) from your gross income.
Transfer the total: Take the final number from line 31 and transfer it to your Form 1040 (specifically Schedule 1).

Tax preparation software turns filing your Schedule C into a guided question and answer and suggests deductions along the way. It’s usually the cheapest and fastest option for simple freelance income. However, programs like TurboTax rely heavily on your ability to properly categorize your own expenses, which can be difficult if you’re new to it.

A human tax professional costs more, but can give you personalized advice. They can also act as an additional layer of defense, ensuring your Schedule C is accurate and optimized to minimize your tax bill.

Yes, a single-member LLC usually files a Schedule C. The IRS treats your single-member LLC just like you for taxes, not as a separate business. So instead of filing a separate business return, report the LLC’s income and expenses on your personal tax return using Schedule C.

This changes if the LLC has multiple members or if the owner chooses to tax the entity as a C-Corp or S-Corp, which requires different forms such as Form 1065 or Model 1120-S.

You should not use Schedule C if you are a W-2 employee because regular employees cannot deduct business expenses on their personal returns.

If what you’re doing is a hobby rather than a profit-oriented business, you still report the income, but you generally can’t deduct the costs.

Partnerships also skip Schedule C: instead, they file Form 1065 and send each partner a Schedule K-1.

no A 1099 is a form that a customer sends you to show what they paid you. Schedule C is the form you file to report this income and your expenses to the IRS. You may receive multiple 1099s, but you typically use all of that income on a single Schedule C for your business.

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