Schedule C
IRS form used by sole proprietors to report business income and expenses.
Schedule C (Profit or Loss from Business) is attached to Form 1040 by sole proprietors and single-member LLC owners to report business revenue and deductible expenses. The net profit flows to your personal tax return as self-employment income. Schedule C is one of the most commonly audited forms because it allows significant deduction claims.
Example
A freelance writer reports $85,000 in revenue and $22,000 in deductible expenses on Schedule C, resulting in $63,000 of net profit subject to income and self-employment tax.
Why It Matters for Your Business
Schedule C determines your business profit, which is subject to both income tax and self-employment tax, making accurate expense tracking essential.
Practical Tips
- •Organize expenses by Schedule C category throughout the year, not just at tax time.
- •Keep detailed records for deductions most likely to trigger an audit, like vehicle and home office expenses.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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