IRS Form, Schedule C, Reporting and Filing

Update 2013

There are a few changes to the tax code concerning home office deductions. Check with IRS.gov before doing your tax return!

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Springtime

Now that spring has sprung, the tax deadline will be here before you know it. If you own a small business, such as freelance writing, and you make $400.00 or more, then you will have to fill out an IRS form Schedule C. Filling out the form is relatively easy, but you may find that gathering and organizing the data can be rather challenging.

First, the heading portion of the form must be filled out. This section contains your name, type of business, business name and address, and accounting method. In addition, you must state whether you are materially participating in the business as opposed to owning the business for investment only and if you started the business in the current tax year. To the immediate right of the form is a section for your social security number, the occupation code, and the employer identification number. Once this is done, you will need to fill out the income portion.

Schedule C Form Explained

Income And Expenses

You will find the income portion on page 1 of the form. Report gross receipts on line 1 and any returns on line 2.

On line 3, subtract line 1 from line 2.

Next, enter the amount of your cost for goods sold on line 4.

Subtract that amount from line 3 and report on line 5.

This will be your gross profits. In some instances, you may have other income to report on line 6. Report the new total on line 7. Once you have determined your gross profit, you may start listing your expenses in section 2.

All of these expenses will reduce the amount of your gross profits. Almost all of the money that you spend to keep your business running is deductible. To be eligible, each expense must be ordinary and necessary. Some examples are advertising costs, vehicle expenses, contract labor, employee benefit programs, legal services, office supplies, etc. If you take a ride in a hot air balloon to "advertise" your business, the IRS may question it as it is neither ordinary nor necessary.


Net Profit

Once you have figured out your total expenses, you can report your net profit on line 31. Also report this amount on line 12 of your 1040 form. 4 On the back of this form is where you can figure your vehicle expenses, including mileage, depreciation and maintenance. In addition, use this form to reconcile your inventory costs and sales and any extra expenses not previously reported. If you use part of your home as a business office, you can claim part of your mortgage interest, insurance, real estate taxes and more at a percentage.

Make sure you keep accurate records, the IRS is adamant about it. Keep logbooks and records of your expenses.

Things you will need to keep for the IRS are:

  • receipts of all expenses
  • logbook of your mileage
  • logbook of business travel
  • blank schedule C form

© 2012 Mary Krenz

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Comments 2 comments

Paul Davidson 2 years ago

Great article. Thanks for the info, you made it easy to understand. BTW, if anyone needs to fill out a form 1040 Schedule C, I found a blank form here http://goo.gl/y9dML9. This site PDFfiller also has some tutorials on how to fill it out and a few related tax forms that you might find useful.


janiek13 profile image

janiek13 2 years ago from Florida's Space Coast Author

Thank you for your kind words. IRS.gov has blank forms as well.

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