Schedule C Instructions

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Edited by Pat Bitton

May 20, 2021

What is a Schedule C form?

Schedule C (Form 1040 or 1040-SR) is a tax form used to report to the IRS profits and losses of a business for which the filer is the sole proprietor. Schedule C requires that the business’s primary purpose is profit or income and that the filer is regularly and consistently involved in the business activity.

The Schedule C form consists of three sections.

The first section requires information about the business’s proprietor (name, social security number) and the nature of the business (product or service, name, and address of the business, accounting method).

It then poses a series of questions regarding the business: did the filer “materially participate” in the business’s operation during the filing year? Was the c started during the filing year? Did the business make any payments that would require 1099, and, if so, was 1099 filed?

The second section of the Schedule C form deals with income. This section provides spaces to fill in sales, returns and allowances, cost of goods sold, other revenue, and gross profits.

The third section deals with expenses. This section lists various possible expenditures, including advertising, car and truck expenses, contract labor, insurance, etc.

Next, it provides a space for the total expenses added up from the preceding list.

The next question calls for a tentative profit/loss calculation, followed by a question regarding expenses for business use of the filer’s home.

Once these have been calculated and filled in, the next space requires the filer to enter net profits/losses by expenses from profits. The form then provides instructions on how to file either a profit or a loss.

The Schedule C form is designed for self-employed taxpayers. Many of those who fill out Schedule C are proprietors of new businesses. The Schedule C form reports both profit and losses.

Movavi’s free Schedule C form is printable; you can also download the form as a pdf.

Instructions for Schedule C form

Below are step-by-step instructions on how to fill out a Schedule C form.

  • Line A – Describe the business that provided income.
  • Line B – Enter the six-digit business code (more on this later).
  • Line D – Enter your employer identification number (EIN). This number is provided on Form SS-4. If you do not have an EIN, leave this line blank.
  • Line E – Enter your business address.
  • Line F – Identify whether you are using cash or accrual method of payment.
  • Line G – If you were materially involved in your business (more than 500 hours of work per year), check the “Yes” box.
  • Line H – If you started your business during the year you are filing, check this box.
  • Line I – If you paid for any services that required you to file a 1099 Form, check the “Yes” box. If not, check “No.”

Part I – Income


Disclaimer: The templates here are provided for reference only and you should always talk to a professional for all legal matters.

  • Line 1 – List all income your business received during the filing year.
  • Line 2 – Enter any sales returns or allowances for the filing year. Returns include refunds for damaged, unwanted, or defective products; an allowance reduces the selling price rather than providing a full refund.
  • Line 6 – Report any business income not included elsewhere on this form. Types of income that may appear here include finance reserve income, scrap sales, bad debts your business covered, interest, state gasoline or fuel tax refunds, and prizes or awards related to your business.

Part II – Expenses


Disclaimer: The templates here are provided for reference only and you should always talk to a professional for all legal matters.

  • Line 9 – List expenses involving your car or truck or take the standard mileage rate.
  • Line 10 – Enter the total commissions and fees for the filing year.
  • Line 11 – Enter the cost of contract labor for the filing year.
  • Line 12 – List the number for the depletion of natural resources.
  • Line 13 – Enter your depreciation and Section 179 expense reduction.
  • Line 14 – Deduct contributions to employee benefit programs.
  • Line 15 – Deduct premiums paid for business insurance.
  • Line 16 – List interest you paid for any mortgage on real property used by your business.
  • Line 17 – List fees charged by attorneys or accountants that are ordinary and necessary expenses directly related to operating your business.
  • Line 18 – Enter expenses for postage and office supplies.
  • Line 19 – Enter your deduction for contributions you made to any employees’ pension, profit-sharing, or annuity plan.
  • Line 20 – Enter the business portion of your rental cost for any equipment or vehicles.
  • Line 21 – Deduct the cost of incidental repairs or maintenance that do not add to the property’s value or prolong its life.
  • Line 22 – Deduct the cost of materials and supplies you used during the filing year.
  • Line 23 – Deduct the following licenses and taxes: state and local sales tax; real estate and personal property taxes; licenses and regulatory fees for your business paid to state and local governments; Social Security and Medicare taxes paid to match required withholding from your employees’ wages; federal unemployment tax paid; federal highway use tax; contributions to state unemployment insurance or disability benefits fund.
  • Line 24 – Enter expenses for overnight travel (lodging, transportation, and meals) for your business.
  • Line 25 – Deduct utility expenses for your business.
  • Line 26 – Enter total salaries and wages for the tax year.
  • Line 30 – Enter any applicable deductions for business use of your home (see Form 8829).
  • Line 31 – Enter net profit or loss for the filing year.
  • Line 32 – List any at-risk rules that apply to your business.
  • Line 33 – Enter the value of your inventory.
  • Line 35 – If you are changing your method of accounting, refigure last year’s closing inventory and enter it here. For example, if you switched from cash to accrual in filing the year 2020, you will need to recalculate the closing inventory for 2019 and include it here.
  • Line 44b – If you converted a vehicle from personal to business use, enter business commuting miles here.
  • Line 47 – Provide record-keeping information on car or truck expenses.

Further information on filling out the Schedule C form is available here.

What is the difference between a Schedule C and a business tax return?

A Schedule C form is intended for anyone who is the sole proprietor of a business. Any business with more than one partner serving as proprietors would not qualify for the Schedule C form.

Instead, businesses with multiple proprietors need to file a Form 1120.

Schedule C business codes

Business codes are used to identify the type of services or products your business provides. The code does not directly affect your tax liability but is used by the IRS for statistical purposes.

You can find a list of applicable business codes here.

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