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How to Fill Out Schedule C

Schedule C is the form used by sole proprietors (and, as such, independent contractors and owners of single-member LLCs) to report their profit or loss from a business. If you kept good records for the year as to your revenue and expenses, filling out this form shouldn’t be too difficult.

Step 1: Download the Form.

Step 2: Fill-in your personal information.

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The top of the form simply asks for some basic information such as your name, SSN, address, etc. It also asks for:

  • Your business name (if different from your personal name).
  • A description of the product or service you offer. (They’re only looking for a couple words here.)
  • The 6-digit code that corresponds most closely to your type of business. The last 3 pages of this document have a table with all the codes listed along with the business-type they correspond to. If your business doesn’t match any of those given, enter 999999 for “unable to classify.”
  • Your accounting method: Unless you’re quite certain that it’s accrual, the answer is “cash.”
  • Whether or not you “materially participated” in the business. For most small business owners the answer is yes.

Step 3: Fill-in “Part I – Income”

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  • Enter your total sales on Line 1.
  • If you had any returns, enter that figure on Line 2.
  • If you sell a physical product, enter your “Cost of Goods Sold” on Line 4. (Page 2 of Schedule C has a worksheet to help you calculate your CoGS.)
  • Enter your total sales, minus your returns and your Cost of Goods Sold on Line 7. (This amount is known as Gross Income.)

Step 4: Fill-in “Part II – Expenses”

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  • List each of your expense categories on the appropriate line.
  • If you have any deductible expenses that don’t seem to match any of the given categories, total them up and enter the total on Line 27. Then list each of them on Page 2 (Part V – Other Expenses).
  • Add up your expenses, and enter the total on Line 28.

Step 5: Calculate Your Profit/Loss

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  • Subtract Line 28 (total expenses) from Line 7 (Gross Income) and enter the balance on Line 29.
  • If you’re deducting expenses for the business use of your home (ie, Home Office Deduction) list the total on Line 30, and attach your completed Form 8829.
  • Subtract Line 30 from Line 29 to arrive at your Net Profit or Loss.

Step 6: Pat yourself on the back/go get a cookie. :-)

For More Information, See My Related Book:

Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less

Topics Covered in the Book:
  • Estimated tax payments: When and how to pay them, as well as an easy way to calculate each payment,
  • Self-employment tax: What it is, why it exists, and how to calculate it,
  • Business retirement plans: What the different types are, and which one is best for you,
  • Click here to see the full list.
A testimonial from a reader on Amazon:
"Quick and easy read. No fluff, just straight to the point and gives you more helpful information that you might imagine. If you are looking to get the bottom line information you need to start your business right then this book is a must have."
If you want to discuss this article, I recommend starting a conversation over at the Bogleheads investing forum.
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