SCH C (Form 1040) Profit or Loss from Business (Sole Proprietorship)

SCH C (Form 1040), Profit or Loss from Business (Sole Proprietorship)

• Taxpayers use SCH C to report income or loss from a business they operated as a sole proprietor.
• 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.
  • Self-employed individuals may be:
    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.
• Taxpayers may use the same SCH C for multiple forms of income as long as the work is the same type of work.

All applicable SCH C Due Diligence Documents must be completed prior to entering ANY information on SCH C. 

Follow the instructions below to correctly complete SCH C:

1. Select Add Form

2. Begin by typing SCH C, into the search bar at the bottom of the All Forms and Schedules Menu

3. Select Form SCH C. Double-click to add the form

4. If a joint return, choose New Taxpayer's or New Spouse's Occurrence

5. Complete Lines A-J as needed (not all taxpayers will have the information in each section)

6. Complete the QBID indicator. For more information regarding QBID reference What is the Qualified Business Income Deduction (QBID)?

7. Link any 1099-NEC, 1099-MISC, or 1099-K forms

8. Complete Part I-Income

• If the taxpayer has 1099 forms this income will be displayed on Line 1 as shown.
• If the taxpayer took the payments themselves via cash, check, or other medium those must be entered in the Gross receipts or sales line
• Taxpayers may have a combination of 1099 forms and Gross Receipts.

9. 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

10. Complete Part III-Cost of Goods Sold for taxpayers who have inventories. 

11. 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

12. 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

You can view a taxpayer's net profit or (loss) on SCH C Line 31.