WHAT EVERY SOLE PROPRIETOR SHOULD KNOW ABOUT SCHEDULE C – A BRIEF SUMMARY

If you are a freelancer, have a side gig, run a small business, or work for yourself, you may have to file Schedule C form in the upcoming tax season. Simply put, the IRS Schedule C is a tax form for declaring profit or loss from a business. Your business income minus the business expenses are the net profit (or loss), and you report your net profit as income Form 1040. All American citizens must fill out Schedule C during taxation and attach it to form 1040. However, the tremendous significance of Schedule C is for 1099 workers, especially sole proprietors or single-member LLCs.

ARE YOU ELIGIBLE TO FILE SCHEDULE C?

Schedule C is for two businesses: single-member liability corporations (LLCs) and sole proprietorships.

• If you own, run, and manage an unincorporated business and are entitled to all the profits and responsible for all the losses and liabilities, then you have to file Schedule C form. Freelancers, independent contractors, and businesses run by one individual all fall under this category.

• Business entities owned by managed by one individual are also subject to filling out Schedule C during taxation.

• Thirdly, all salaried employees who have a side hustle or are involved in freelancing projects must also file the IRS Schedule C.

THINGS NEEDED TO FILL OUT SCHEDULE C

Some of the pertinent information you need prior to filling out Schedule C are –

• The business income statement

• Balance sheet for the current tax year

• Receipts for your business expenses

• Mileage and other vehicle records, if you have used any for your business

BENEFICIARIES OF SCHEDULE C- A BRIEF OVERVIEW

Schedule C has veritable benefits for both small business owners and the US Internal Revenue Service. Within the stipulations set out by the form, as a small business person, you can deduct multiple expenses from your tax bill. In addition, anything that the IRS can deem to be an 'ordinary and necessary' business expense can be included in tax deductions. So, without further ado, let us gauge the top five deductions that sole proprietors can include on Schedule C form.

1. Advertising – You can include all the costs incurred in business advertisements under Line 9 in Part II (Expenses) of Schedule C. Do not hesitate to essentially incorporate anything you did to earn new business, increase sales, or rope in more customers, which you cannot categorize elsewhere.

2. Vehicles and Machinery – Use Line 9 of the schedule to deduct either actual expenses incurred on business vehicle operation (gas, license, maintenance), or the standard mileage rate. Likewise, Schedule C form also gives you the freedom to deduct the cost of leasing equipment or vehicles on Line 20.

3. Employee Benefit Programs – Under the IRS' gaze, you are an employer and an employee; therefore, you can deduct your own medical, dental, or other long-term care insurance premiums on Line 17 of Schedule C form attached to Form 1040.

4. Property Expenses – The costs of maintaining and renting the property where your sole proprietorship is located can be deducted from Schedule C. In case you use one portion of your home as an office same, deductions can also be made on it.

Being a solo business owner is difficult in itself, and the taxation process can make your life more stressful. However, with Flyfin's AI-powered tax deductions calculator, you do not have to worry, as it will compute all the deductions on Schedule C form that apply to you, thereby making your life easier.

Also read - What is an IRS 1099 Form? When Do You Need to File it?