What is a Schedule C and who needs to file it?
Schedule C is the federal tax form filed by most sole proprietors; one owner businesses. As you can tell from its title, Profit or Loss from Business, it’s used to report both income and losses. Many times, Schedule C filers are self-employed taxpayers who are just getting their business started. In addition to those who do well at the start, this group can also include new business owners who make very little or no profits, or even lose money. There is also a shorter form, Schedule C-EZ, Net Profit for Business. This is for self-employed individuals with less complex situations including business expenses of less than $5,000, no net losses and no employees.
What is the process for filing a Schedule C?
The process actually starts when the business does with good recordkeeping. That will ensure the business owner has everything he or she needs when it comes time to file a tax return. Schedule C is filed annually as an attachment to Form 1040, the individual tax return. The quickest, safest, and most accurate way to file is by using IRS e-file, either online or through a tax professional who is an authorized IRS e-file provider.
Filing Schedule C Tips
Start making quarterly, estimated payments to cover your income tax and social security self employment tax. You can make deposits electronically, using the Electronic Federal Tax Payment System, EFTPS. If you have workers, classify them properly as employees or independent contractors. This is determined by law not the choice of the worker or the business owner. Be sure to deposit your federal employment taxes on time. Put a plan in place to protect your financial and tax records and help you recover quickly in the event of a disaster. And steer clear of abusive tax avoidance schemes.
Where can a new business owner get more information?
Whether you’ve been in business for a while or are just getting started, our Website has a wealth of information. Go to IRS.gov/smallbiz (with a “z”) for starters. You can browse through the information online, order free tax publications and products, or take a small business tax workshop.