What is Form 1040 Schedule C?
Form 1040 Schedule C is a form issued by the Internal Revenue Service. This two-page form is used to report income or loss from a business you operated or as a profession you practiced as a sole proprietor. This form may also be used to report income and deductions of certain qualified joint ventures.
Can I fill out Form 1040 Schedule C?
If you currently operate a business or a sole proprietor and would like to report your income or loss from said business, then you are eligible to fill out Form 1040 Schedule C. Additionally, if you would like to report income and deductions of a qualified joint venture you operate, then you are also eligible to fill out this form.
What do I need to fill out Form 1040 Schedule C?
To fill out this form, you will need to provide information regarding your business.
You will have to provide the principal business or profession, including product or service, your business’ name if applicable, your business’ address including the apartment, suite, or room no., along with the corresponding city or town, post office, state, and ZIP code.
You will also have to indicate your social security number (SSN) and your employer ID number (EID).
You will also need to indicate your primary accounting method among the choices of cash, accrual, and other. If you choose the “other” option, you would have to specify the undescribed primary accounting method.
You must also provide information regarding your income. Specifically, you will need to indicate the amounts of your gross receipts or sales, returns and allowances, cost of goods sold, gross profit, other income including federal and state gasoline or fuel tax credit or refund, and your gross income.
You will also be asked to provide information regarding your expenses. Specifically, you have to indicate the amount of money spent on advertising, car and truck expenses, commissions and fees, contract labor, depletion, depreciation and section 179 expense deduction, employee benefit programs, insurance that is other than health, interest, mortgage, legal and professional services, office expense, pension and profit sharing plans, rent for equipment and other business properties, repairs and maintenance, supplies, taxes and licenses, travel and meals, utilities, wages, and other.
Additionally, you’ll have to provide your total expenses, tentative profit (or loss), expenses for business use of your home, net profit (or loss), and risk.
You will also be asked to provide information regarding your cost of goods. You will be asked for your method(s) used to value your closing inventory, as well as the amounts of money spent on inventory at the beginning of the year, purchases less cost of items withdrawn for personal use, cost of labor, materials and supplies, other costs, inventory at the end of the year, and cost of goods sold.
If you are claiming car or truck expenses, you will also have to provide information on your vehicle. Specifically, you will have to indicate the date when you placed your vehicle in service for business purposes, total number of miles driven for business, commuting, and other purposes, and specify whether or not you have another vehicle.
You will also be asked to provide any other expenses that were not listed.
How do I fill out Form 1040 Schedule C?
We will be guiding you through the process of filling out Form 1040 Schedule C by giving you a step-by-step tutorial on how to properly fill out this form.
Before attempting to fill out Form 1040 Schedule C, examine the document carefully to identify exactly what information you will need to fill out this form. For your convenience, we have placed the information you will be needing in the section previous to this one.
Ensure that all information that you are about to write down in this form is completely true and accurate.
In this section, you will need to provide information regarding yourself, the proprietor.
First, write down your principal business or profession. When indicating this, include as well the product or service your business provides.
Following this, write down your business’ name. If your business has no name, then leave this space blank. You must then include your business’ address including the apartment, suite, or room number. Provide as well the address’ city or town, post office, state, and ZIP code.
You must then specify the primary accounting method. Choose among cash, accrual, and other, which you will have to specify in the corresponding space.
You will then be asked some “Yes or No” questions. Indicate your answer by marking the corresponding “Yes or No” box. You will be asked:
- Did you “materially participate” in the operation of this business during 2019?
- Did you start or acquire this business during 2019?
- Did you make any payments in 2019 that would require you to file Form(s) 1099?
- If “Yes”, did you or will you file required Forms 1099?
In this section, you will have to indicate the amount of income you received.
You will be asked to write down the amount of income you received through:
- Gross receipts or sales
- If this income was reported to you on Form W-2 and the “Statutory employee” box on that form was checked, mark the appropriate box.
- Returns and allowances
- Subtract line 2 from line 1
- Costs of goods sold
- Gross profit. Subtract line 4 from line 3.
- Other income, including federal and state gasoline or fuel tax credit refund.
- Gross income. Add lines 5 and 6.
You will then be asked to provide information regarding your outgoing expenses.
You will be asked to write down your expenses for:
- Care and truck expenses
- Commissions and fees
- Contract labor
- Depreciation and section 179 expense deduction
- Employee benefit programs
- Interests for
- Legal and professional services
- Office expenses
- Pension and profit-sharing plans
- Rent or lease of
- Vehicles, machinery, and equipment
- Other business properties
- Repairs and maintenance
- Taxes and licenses
- Travel and meals
- Wages (less employee credits)
- Other expenses
You will also be asked to provide the total expenses for business use of home, tentative profit (or loss), expenses for business use of your home, total square footage of your home, and part of your home used for business.
You must also indicate your net profit (or loss). If you enter a profit, enter on both Schedule 1, (Form 1040 or 1040-SR), line 3 (or Form 1040-NR, line 13) and on Schedule SE, line 2. If you have estates and trusts, enter on Form 1041, line 3. If you enter a loss, check the box describing your investment in this activity.
If you checked Box 32a, you must enter on Schedule 1, (Form 1040 or 1040-SR), line 3 (or Form 1040-NR, line 13) and on Schedule SE, line 2. For estates and trusts, enter on Form 1041, line 3. If you checked Box 32b, then you must attach Form 6198. Your loss may be limited.
Cost of Goods Sold
In this section, you must input the costs of goods sold and other operating expenses.
First, indicate the method(s) used to value your closing inventory by marking the appropriate box. You are given the choice of cost, lower of cost or market, or other. If you select “other”, you must attach an explanation.
Then you must indicate whether there are any changes in determining quantities, costs, or valuations between opening and closing inventory by marking the appropriate “Yes or No” boxes. If “Yes” was selected, then attach an explanation.
You must then indicate the costs of the following:
- Inventory at the beginning of the year
- If different from last year’s closing inventory, attach an explanation
- Purchases less cost of items withdrawn for personal use
- Cost of labor, not including amounts paid to yourself.
- Materials and supplies
- Other costs
- Then you must add lines 35 through 39
- Inventory at the end of the year
- Cost of goods sold
- Subtract line 41 from line 40. Enter the result both here and on line 4.
Information on Your Vehicle
In this section, you will be providing information regarding your vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business.
First, indicate the date when you placed your vehicle in service for business purposes in the month, day, year format. Afterward, indicate the number of miles you drove your vehicle in 2019 for business purposes, commuting, and other.
Then, you must answer a series of “Yes or No” questions by marking the box corresponding to your answer. You will be asked if:
- Your vehicle was available for personal use during off-duty hours
- You (or your spouse) have another vehicle available for personal use
- You have evidence to support your deduction
- If “Yes”, you will be asked if this evidence is written
In this section, you must list down business expenses not previously listed.
After completing everything in this form, congratulations, you have successfully completed Form 1040 Schedule C.