What is Schedule C?
Schedule C (PDF) is the business tax return used by sole proprietors and by single-member LLC's, which file business taxes as sole proprietors. Read more about how a sole proprietor pays business taxes.
What are the changes in Schedule C for 2011?
- Merchant card reporting. Lines 1a and 1b have been added for reporting of gross receipts received by credit or debit card. The requirement for reporting these payments has been deferred for 2011, so just put a zero in line 1a and enter the total gross receipts on line 1b.
- Mileage rate. On line 9, use the standard IRS mileage rate to calculate business mileage deductions.
- Information reporting. Lines I and J have been added to include information about your reporting of payments using Form 1099. These forms are required if you pay $600 or more to independent contractors or certain other businesses. See the information on Form 1099-MISC, and note that the 1099-MISC is one of several types of 1099 forms.
- Other changes Other changes to Schedule C for 2011 include changes for qualified joint ventures reporting rental real estate income and reporting of musical composition expenses.
Who must file Schedule C?
If you operate your business as a sole proprietorship (that is, you have not designated a legal business entity like an LLC, corporation, or partnership), you must complete a Schedule C. If your operate your business as a single-member limited liability company, you also use Schedule C for your business income taxes.
Where do I get information for completing Schedule C?
Before you begin to work on your Schedule C, you will need to gather certain end-of-year business information. You will need:
- A profit and loss statement (sometimes called an income statement) showing the entire year of 2011
- A balance sheet for the year ending December 31, 2011
- Statements about assets showing purchase of assets in 2011
- Information on inventory to prepare a cost of goods sold calculation
- Details on travel and car/truck expenses, meals and entertainment expenses, and home business expenses.
How do I complete Schedule C? In general, you will first complete the cost of goods sold section and calculate gross income. Then you will list allowable deductions. Deductions are subtracted from gross income to get a net income. Read this step-by-step process for completing Schedule C.
How do I file Schedule C?
The information on your net business income from line 31 of your Schedule C is added to your personal tax return on Line 12: Business Income or Loss. This income is included with all other income sources to determine your total adjusted gross income tax liability for 2011 taxes. Read more about including Schedule C on your personal tax return.
Can I file business taxes using Schedule C-EZ?
Smaller businesses may be able to use Schedule C-EZ. The IRS says: small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. Learn more about Schedule C-EZ and how to complete it.
Must I file a Schedule C for each business I own?
Yes, Schedule C is used to report the net income from one business. So if you have several small businesses that use Schedule C, you must complete this form for each business. Then, net income from totals all Schedule C's are added together on Line 12 of your personal tax return.
How do I complete Schedule C for a husband-wife partnership?
The husband-wife partnership is a special case. Partnerships must use Form 1065 to report partnership income, but in certain circumstances a husband-wife partnership may become a qualified joint venture and file taxes using two Schedule C forms (one for each spouse). Check with your tax advisor before attempting to file as a qualified joint venture. Read more about how to complete Schedule C forms for a husband-wife partnership.
How do I correct a mistake on Schedule C?
To correct an error in Schedule C, you will need to file a corrected Schedule C as part of an amended personal tax return, using form 1040x. Read more about how to file Form 1040x.
What about schedule SE for self-employment taxes?
The net income information on Schedule C is used to determine the amount of self-employment tax you owe (for Social Security/Medicare taxes); Schedule SE is used to calculate the self-employment tax amount.
