A Schedule C is a tax form that is used by sole proprietors, single-member LLCs, and certain other business entities to report their income and expenses to the Internal Revenue Service (IRS). The form is also known as Form 1040, Schedule C.
The Schedule C tax form is used to report profits or losses from a business that is operated as a sole proprietorship. It includes sections for reporting income, cost of goods sold, and various types of business expenses. Once the income and expenses are entered, the form calculates the business’s net profit or loss.
The net profit or loss from the Schedule C is then transferred to the owner’s individual tax return on Form 1040, where it is used to calculate the amount of income tax owed. It’s important to note that self-employed individuals are required to pay self-employment tax in addition to income tax.
Overall, the Schedule C tax form is a crucial part of the tax reporting process for sole proprietors and other small business owners. It’s important to keep accurate records of income and expenses throughout the year in order to ensure that the form is completed correctly and that the appropriate amount of taxes is paid.
According to the IRS, approximately 28 million tax returns were filed with a Schedule C in 2020 (the most recent year statistics were available.)
Here is the most recent guidance from the IRS regarding business expenses: