There are tons of perks that come with being your own boss. Setting your own schedule. Deciding how big you want to grow your business. Choosing who you want to work with (and saving yourself future headaches when you get bad vibes from someone on a discovery call).
A big catch, though, is that you’re responsible for the entire financial side of the business, too. That includes knowing how to file a Schedule C—one of the most important tax forms for self-employed business owners.
Not to be confused with other self-employed tax documents, a Schedule C needs to be clearly and accurately filed if you're going to properly report your business profits and losses. Filing correctly can also reduce the amount of tax you owe when all is said and done.
Here’s how to file a Schedule C to avoid confusion, keep Uncle Sam happy, and give yourself the best chance at a smooth tax season.
What is a tax schedule?
A tax schedule is a rate sheet created by the IRS that details the amount of tax you will owe based on your filing status, income, and types of deductions.
You’ll fall into one of five filing statuses:
- Single
- Married, filing separately
- Married, filing jointly
- Head of household
- Qualifying surviving spouse
There are also several different schedules you may be required to file depending on your deductions. These include:
- Schedule A — Used to report itemized deductions when you don’t take the standard deduction.
- Schedule B — Used to list out the various interest and dividend amounts you received throughout the year and where they come from.
- Schedule D — Used to report earnings from the sale of capital assets, like stocks or your home.
- Schedule EIC — Used to report how you qualify for certain tax credits.
- Schedule SE — Used to determine the amount of social security tax you owe as a self-employed person.
Last but not least, there’s the star of this blog: the Schedule C.
What is a Schedule C and why you need to file one
A Schedule C is a tax form for sole proprietors. You’ll file it to report your profits or losses throughout the year. The IRS uses those numbers to determine your taxable profit and calculate your self-employed tax obligations.
The difference between a 1099 and Schedule C
Many sole proprietors receive both forms, but they serve different purposes in your small business tax filing:
1. Form 1099
- Reports income that did not have taxes withheld over the year
- Issued if you worked as an independent contractor or freelancer
2. Schedule C
- Reports your profit and losses.
- Income documented in your 1099 can count as profit and contribute to the final number reported on your 1040 Schedule C
Do I need to file a Schedule C?
Simply put, if you’re a sole proprietor, self-employed, freelancer, independent contractor, or solopreneur, yes. But that begs the question—do you fall under that category in the first place?
Am I a sole proprietor?
A few conditions—related to you and/or your business—mean that you’ll fall under this status come tax season.
You’ll likely qualify as a sole proprietor if:
- Your business isn’t filed as another status, like an LLC or corporation
- You’re a single-member LLC
- You operate to make money (this isn’t just a hobby you do for free)
- You don’t have a superior who withholds taxes from your income
Any of those apply? Great! Then it’s time to gather a few things for your accountant.
Your Schedule C checklist
Unlike simply handing a W2 employee form to your accountant and letting them work their magic, you’ll need to gather a few more items to file a Schedule C.
Make sure you have your:
- Social Security Number or Employee Identification Number
- Income statement
- Balance sheet
- Inventory count and value
- Vehicle mileage records (if you use a car for work)
- Receipts for business expenses
Now, let’s get one thing straight about expenses. As nice as it would be to write off every dollar you spend as a business expense, that will land you in huge trouble with the IRS. Any business expense you report needs to qualify as “ordinary and necessary.”
For example, the office space you rent as an employee hub? Totally ordinary and very necessary. A beachfront vacation home? Not so much. And while it’s ideal to have a paper trail, there is a way to justify business expenses without receipts.
Once you have all your financial data and report, you’re ready to fill out your Schedule C.
How to file a Schedule C: Step-by-step process
Filing a Schedule C doesn't have to be overwhelming. Here's how to file a Schedule C in simple steps, but make sure to have the IRS instructions on hand too.
- Gather your documents (use your checklist above)
- Complete your personal information (Lines A-J)
- Calculate your income (Lines 1-7)
- List your business expenses (Lines 8-30)
- Complete additional sections (COGS, vehicle info, other expenses)
- Attach to Form 1040 and file by the deadline (typically April 15)
Breaking down the Schedule C form sections
Let's break down each section of the Schedule C tax form so you know exactly what information goes where.
Your personal information
This is the simplest section. In the boxes labeled A-J, you’ll include:
- Your name and address
- Your business category code (found in the Schedule C instructions)
- Your SSN and EIN, if applicable
You’ll also potentially check “yes” boxes related to:
- Working in your business
- Being in business for the first time
- Paying subcontractors or non-employee individuals more than $600. If you did, you’ll have to file a 1099 for each person.
You will also need to report your accounting method, like cash to accrual. This is how you account for and report your financial activity throughout the year. If you rely on a bookkeeper or accountant to manage your ledgers, they'll have this information.
Your income
The next few lines will ask for information about the money you’ve made during the year.
- Line 1 — Enter your gross income (your total sales before tax)
- Line 2 — Enter your returns or allowances (all issued refunds)
- Line 4 — Enter your costs of goods sold (you’ll elaborate on this later)
- Line 6 — Enter any additional income (bank interest, tax fuel credits, grants, etc.)
Your business expenses
After you’ve itemized your income, you’ll provide information on what it costs to run your business.
- Line 9 — Enter your car and truck expenses (you can take a standard mileage deduction of 67 cents per mile for 2024 or exact expenses)
- Line 12 — Enter your depletion (typically only used in very niche industries, like mining or timber)
- Line 13 — Enter your depreciation (the value lost on an asset over time)
- Line 18 — Enter your office expenses (strictly office supplies)
- Line 30 — Enter expenses associated with using your home for business (you can deduct the partial cost of some of your bills)
Your cost of goods sold (COGS)
While you entered your total cost of goods sold in Line 4, this section lets you break them down a bit more.
- Line 33 — Enter the value of your inventory
The accounting method you use impacts how you value your inventory. The Cost Method accounts for the literal cost of the item, while the Lower Cost or Market Method compares the current price of the item to what you originally paid for it.
Your vehicle information
Do you use your personal car for work? Do you have a fleet of trucks that your business can’t run without? If you claimed a vehicle back on Line 9, you’ll detail the costs and mileage associated with those vehicles in this section.
Your other expenses
This is your last chance to input any expenses not included in Lines 8-26 or 30. You’ll also have to input the total of several lines into these sections so you can record all expenses properly.
Common Schedule C mistakes to avoid
When learning how to file a Schedule C, watch out for these frequent errors:
- Mixing personal and business expenses — Only true business expenses qualify
- Poor record keeping — Maintain receipts and documentation for all deductions
- Incorrect business codes — Use the right NAICS code for your industry
- Missing estimated tax payments — Self-employed individuals often need to pay quarterly
- Forgetting Schedule SE — You'll likely need this for self-employment tax
When to get professional help with your Schedule C
Remember that figuring out some of these numbers—like the value of your inventory or asset depreciation—can be a bit complicated, so it’s smart to get professional help to ensure you input accurate figures.
Consider working with a tax professional if you have:
- Complex business structures or multiple income sources
- Significant inventory or cost of goods sold calculations
- Questions about asset depreciation
- Concerns about maximizing your business deductions
- Limited time to ensure accuracy
Ready to file your Schedule C with confidence?
While the Schedule C tax form itself isn’t overly complicated, the same can’t always be said for producing the financial statements that give you the answers to the multitude of line questions.
Hiline is here for you. We understand the complexities of small business tax filings and combine our expertise and technology to help you uncover hidden savings. We turn tax season into a strategic opportunity that can help grow your business.
Ready to file your Schedule C with confidence? Our tax experts help sole proprietors like you maximize deductions and avoid costly mistakes. Get your Schedule C review today to ensure you're filing correctly and saving every dollar possible.
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