Schedule C Form: Everything You Need to Know

What Is a Schedule C Form?
Who Files a Schedule C?
What’s on a Schedule C?
How Do I Fill Out a Schedule C?
How Do I Find My Net Profit or Loss?
Get Help With Your Self-Employment Taxes
Frequently Asked Questions

You’ll need a pair of reading glasses or at least a monocle to read all the fine print on a Schedule C tax form. Of course, if you use a monocle, you probably also wear a top hat and are too busy building hotels on Park Place to look at a “shed-yool.”

But seriously, glancing at a Schedule C for the first time doesn’t have to be so confusing. Take a deep breath and let’s go over the details together. We’ll start with the basics!

A form Schedule C: Profit or Loss from Business (Sole Proprietorship) is a two-page IRS form for reporting how much money you made or lost working for yourself (hence the sole proprietorship). In other words, it’s where you report the money you made and subtract your expenses to figure out your net profit.

Why do you need to know your net profit? Well, so you can be a responsible citizen and pay taxes (including the self-employment tax).

If you earned money working for yourself—whether it’s a side hustle or a full-time gig—you have to fill out Schedule C to report income and expenses. You’ll see the term sole proprietor at the top of Schedule C. That’s the fancy business term that means someone who works for themselves. So, if you earned money working for yourself—whether it’s a side hustle or a full-time gig—you have to fill out a Schedule C to report income and expenses.

It might be easier to list what’s not on a Schedule C. In short, Schedule C asks for a lot of information about your business, so we can’t stress it enough­—keep good records. Organization is your friend!

Here’s some of the information you’ll need to complete the Schedule C form:

• Your name and Social Security number as sole proprietor
• Name and address of your business
• The product or service your business provides
• Accounting method for the business (cash, accrual or other)
• If you started or acquired the business during the current tax year
• Detailed reporting of your income and costs of goods sold
• Itemized reporting of any business expenses (advertising, milage and maintenance for vehicles used for your business, rent, utilities, etc.)
• Inventory records

Yeah, it’s a lot. And gathering all that information is just the first mile of the marathon. The rest of the race is navigating the actual Schedule C form. Here’s how it breaks down:

Schedule C is divided into five parts:¹

• Part I is dedicated to income. This is where you add up the money you earned from being self-employed. This could be from a side hustle, like driving for Uber or selling honey at a farmers market, or from something you do full time, like working as a carpenter or a freelance writer.

If you received any 1099-NEC, 1099-MISC or 1099-K tax forms reporting money you earned working as a contractor or selling stuff, you’ll have to report that as income on Line 1 of Schedule C. You’ll also need to add any other money you earned while being self-employed. Unfortunately, you have to pay taxes on it all!

• Part II is all about reporting your business expenses. That includes stuff like home office expenses, advertising, vehicle use, office supplies, equipment and software, business travel and meals, phone and internet costs, and start-up costs.

But here’s some good news: Qualified business expenses (like the ones we mentioned above) are tax deductible, which means they reduce your taxable income and lower your tax bill in the process. Hurray for deductions!

Got small business tax questions? RamseyTrusted tax pros are an extension of your business.

Just remember that the IRS says these expenses must be “ordinary and necessary” to your business. (In case you’re wondering, those vanilla lattes you bought to keep yourself caffeinated do not count as business expenses. Sorry!)

• Part III is where you’ll calculate the cost of services and goods sold. If you earned income from selling stuff—exotic fish, cookies, baseball cards, crafty creations, etc.—you’ll need to report the cost of that inventory.

Here’s a quick example of what Part III might look like. Say you sell vintage books online. At the beginning of the year, you had $10,000 in inventory, and over the year, you added $2,000 in inventory for a total of $12,000. You take your total inventory and subtract your remaining inventory (let’s say it’s $5,000) to come up with your cost of goods sold. In this example it would be $7,000. Keep in mind, inventory refers to your actual cost, not the selling price.

Once you have your cost of goods sold, you go back to Part I and subtract it from your earnings to get your gross profit. (And by gross, we don’t mean chewing with your mouth open.) Add any additional business income, like interest or awards, not reported on Line 1 and boom! You’ve got your gross income.

• Part IV is where you’ll calculate any vehicle expenses associated with your business (if you had any). You’ll need information like the total number of miles driven during the tax year, the number of miles driven for the business, and the number of miles driven for commuting to and from the business (if you’re renting an office space, for example).² Just remember to organize any receipts related to your milage and maintenance!

• Part V is subtitled “Other Expenses” and it’s sort of a catch-all for any other eligible expenses that weren’t listed as a line item in Part II.

With your gross income and your expenses tallied up, finding your net profit or loss is a matter of simple subtraction: gross income - expenses ­= net profit or loss. Hopefully you earned a profit! But even if you had a loss, you have to report that on your taxes.

Your net profit or loss goes on your main 1040 tax form as part of the income component. You’ll also include it on Schedule SE to calculate your self-employment tax, which is a 15.3% tax made up of both the employee and employer portions of Social Security and Medicare taxes.³

Hey, when it comes to being self-employed, taxes can get pretty complicated pretty fast. If you’re looking for a tax expert who can help you navigate all the forms and paperwork, RamseyTrusted tax pros have years of experience and can help you file your taxes with confidence. Find a tax pro today!

If your taxes are pretty straightforward and you want an easy-to-use tax software that can give you some peace of mind, check out Ramsey SmartTax. No hidden fees and no games. That’s how it should be!