IRS Schedule C Form 1040 – What Forms and Schedules are Required? so if you're a self-employed person you're going to have to report uh the income and expense from your self-employed business.
On your form 1040 every year and so that's done with a schedule c and a couple of other schedules and worksheets. And ultimately it's included with your form 1040 and you pay federal income tax and self-employment tax on your net earnings so to start you know who needs, to file schedule c so again it's for self-employed person so sole proprietorships right the most simple form, of business if you don't set up a legal entity you just want to go out. There and start selling a product or a service just in your own name you would report that income and expense on a, schedule c schedule c is also used for single member llc's that are, disregarded for tax purposes so in this example we have john q taxpayer he formed an llc in the state of florida and an llc that is owned 100 percent by a sole, owner is a disregarded entity for federal tax purposes so again it's treated, for tax purposes as if it's he was just running a sole proprietorship and didn't even have the legal entity now if you have an llc cases where you wouldn't use this schedule, so if the llc can file an election to be taxed as an s, or a c corp and if john had, made one of those elections then the lc gets its own tax return he wouldn't use schedule c also if you have an llc with more than one owner right so if john is in business with jane.
They're a 50 50 partnership, it's no longer a disregarded entity so the llc needs to file a form 1065 partnership return each year um and john and jane would get a schedule k1 and they would report their allocation of, the income on their on their form 1040. but again they wouldn't use. Schedule c so and start with this example so john q he's got his llc, there junk you taxpayer llc now the top here is pretty straightforward right um john's information the. Tax id number of the llc address um the accounting method most sole proprietorships are just under the cash, basis method so you know generally you're just just select cash um and the questions here about material participation you know obvious in most cases yes i mean if you're a. Sole proprietor you're going to be the one doing all the work right so you're going to materially participate.
In the operations of the business okay so part one and two income so again pretty straightforward under the cash method report the total, gross receipts you had for the tax. Year and then start editing entering your expenses down here a couple of items to highlight um car. And truck expenses so if you use your car or truck um you know generally you're going to want to deduct the mileage um so you you track how many miles you drive, using your personal vehicle during the year and. Then you multiply that number by the mileage reimbursement rate for the year um so if we jump down here you see the um vehicle information in, part four you can see here where you enter information about your vehicle so the day you started using. It in the business how many business miles you drove and some more questions about the vehicle you know john only. Used his vehicle for 80 miles right so let's say he took one trip to a client and back, round trip was you know 40 mile or 80 miles round trip 40 each way and then.
80 miles is multiplied by the reimbursement rate for the year and so that arrives at 46, couple other items let's see so supplies travel expenses insurance all pretty straightforward legal and professional fees 500 to get the entity, set up and started line 30 is for the home office expenses and again. There's another worksheet and form so form 8829 down here business use of home so you know if he has a, home office he's self-employed again so he's working from home enter information about the home office square footage of of the office versus the total of the house all the indirect expenses and ultimately the allocation that's for business.
Use i have another video about the home office deduction that goes into a little more. Detail so please check out check out that video if you have some more questions on the home office expense okay but if, we jump back up here to schedule c so we've covered all the expenses so now um he's got his. Bottom line net income or loss in some cases uh for his self-employed business he's had. Ten thousand two sixty eight um so what what do we do with that number so the 10 268 like.
I said at the start is the the earnings are subject to both federal income taxes and self-employment taxes right so he's got. To compute the amount of self-employment tax on those earnings that's schedule sc so that should also be included with. Your return um you know, complete section a you know as the instructions stipulate here so you can complete compute the amount of self-employment tax as well as. The amount that's deductible on your return right because if you're self-employed you're paying both pieces the employer and the employee portion and. So as the you know employer also you are allowed a tax deduction for that portion of the employer match for the, fica and the medicare okay um so let's see what else we got in here.