Uncategorized

Who Files a Schedule C?

by Leave a Comment

Self employed people file a Schedule C. It is a form that is added to your 1040. The Schedule C is used to report any income you made from being self employed. (Click here for a detailed description of Schedule C.)

Here is a list of some of the jobs that use a Schedule C most often:

  • Hair Stylists
  • Uber / Lyft Drivers
  • People with Airbnb rentals
  • A person with a lawn care business
  • Independent contractors
  • Amazon affiliate sellers
  • Anyone that gets a 1099-MISC or 1099-NEC
  • Painters
  • Writers
  • Any small business with no employees

If you work for yourself and set your own hours, you can probably use a Schedule C to file your taxes.

What is a Schedule C? (Parts III, IV, V)

by 1 Comment

Page 2 of the Schedule C form has parts III, IV, and V. These sections are also used for expenses.

Part III

Part III of Schedule C is used to report the cost of goods sold for businesses that sell products. This section includes the following lines:

  • Line 32: Beginning inventory
  • Line 33: Cost of goods purchased
  • Line 34: Cost of labor
  • Line 35: Cost of materials and supplies
  • Line 36: Other costs
  • Line 37: Ending inventory

The total of these lines is subtracted from the gross receipts on line 1 to calculate the cost of goods sold. This number is then used to calculate the gross profit on line 4.

Part III of Schedule C is important because it helps to accurately determine the profitability of a business. By tracking the cost of goods sold, businesses can identify areas where they can reduce costs and improve their bottom line.

Part IV

Part IV of Schedule C is used to report information about the use of a vehicle for business purposes. If you use your personal vehicle for business, you can deduct certain expenses related to its use, such as gas, oil, and repairs. However, you must keep accurate records of your mileage and expenses in order to claim these deductions.

To report your vehicle expenses on Schedule C, you will need to provide the following information:

  • The make, model, and year of your vehicle
  • The date you acquired the vehicle
  • The vehicle’s odometer reading at the beginning and end of the year
  • The total miles you drove the vehicle for business purposes
  • The total expenses you incurred for the vehicle, such as gas, oil, repairs, and insurance

You can claim the standard mileage rate for your vehicle expenses, or you can deduct the actual expenses you incurred. The standard mileage rate for 2023 is $0.585 per mile. If you choose to deduct the actual expenses, you will need to keep receipts for all of your expenses.

Part 4 of Schedule C is an important part of your tax return if you use your personal vehicle for business purposes. By accurately reporting your vehicle expenses, you can reduce your taxable income and save money on taxes.

Part V

Part 5 of Schedule C is used to report any other expenses that are not listed in Parts 1-4. This could include expenses such as office supplies, professional fees, or travel expenses. The total of these expenses is entered on line 27a.

The expenses reported on Part V are usually items that don’t fit into an of the categories already listed on the form in part II. You can use this section to enter expenses you have that are specific to your business. If you are a hair stylist you might put the amount you paid for clippers and scissors here. A restaurant/bar could put CO2 purchases here.

What is a Schedule C? (Part I and II)

by Leave a Comment

A Schedule C is the tax form people use to report self employment income on their tax return. It is a form that gets added to your 1040 form. If you are a sole proprietor you can use a schedule C.

What does a Schedule C do?

Schedule C calculates your net income from your small business. You enter your sales at the top and then your expenses below that. When you subtract your expenses from your sales, you get your “net income”. Your net income is used to calculate your self employment taxes and your income taxes.

What goes on a Schedule C?

Part I

Part I calculates your gross income. Gross income is all your sales and revenue before you subtract any expenses.

Line 1 is your gross receipts. Depending on what your business is and how you get paid, there are different ways to calculate this number.

If your business sells items to lots of different customers thorough a webstore or a marketplace like Etsy or Amazon you can add up your bank deposits to get this number. If you have a physical store that sells items, adding up your bank deposits will also give you this number. There are also a lot of Point of Sale systems that will track this number and give a report you can use.

Hair stylists, massage therapists, and other businesses like them can usually just add up all of their bank deposits to get this number.

If you are an independent contractor and you get a 1099, or several 1099’s, add up your 1099’s to get your gross receipts. If you also have income that is not on a 1099, add this to your 1099 total.

Part II

Part II of Schedule C is where you enter your expenses.

Your expenses are all of the things you spent money on to earn the money you made in Part 1. The schedule has lines for expenses such as: advertising, rent, repairs and maintenance, legal fees, travel, and utilities.

There is also a line for “Other expenses”. Line 27 is the total of your expenses that you entered in Part V. Any expense you have that does not fit one of the categories in Part II goes in Part V and the total goes on line 27a. (I don’t know why they don’t just let you list everything in Part II)

After you add up all of your expenses and put that total on Line 28, you subtract that number from your gross receipts. This your “Tentative profit or loss” and gets entered on Line 29. It’s tentative because if you have a home office, that expense gets entered on line 30.

After you subtract your home office, if you have one, the number you get is your net profit or net loss. If it’s a net profit, you pay taxes on it. If it’s a net loss you may be able to deduct it from any other income you have.

Click here for Parts III, IV, and V of Schedule C