Schedule C is a tax form used by sole proprietors and other self-employed business owners to report the income and losses of their businesses.
This page describes Schedule C and provides instructions for completing and filing this form.
Table of Contents
What Exactly Is Schedule C?
Many small businesses are required by the IRS to utilize Schedule C to record their profit or loss for federal income tax purposes each year. To compute total taxable income and any tax due, this form’s information is combined with the owner’s other income, deductions, and credits on forms 1040, 1040-SR, 1040-NR, and 1041. The IRS business code for instacart is 7299.
Who Should Make Use of Schedule C?
Schedule C is used by sole proprietors or small enterprises that have not registered with their state as another business classification. Owners of single-member limited liability corporations (LLCs) who have not chosen to incorporate.
Before You Begin Work on Schedule C
The first stage in completing your instacart business code Schedule C is gathering your business’s financial information for the year.
You will need this information even if you utilize a tax preparer or business tax software.
Profit and Loss Report
A profit and loss statement (P&L), sometimes known as an “income statement,” assesses your company’s net income.
It totals all of your earnings and subtracts all of your business expenses.
The information on this form serves as the foundation for the majority of the information required for Schedule C.
Cost of Goods Sold Information
If your company sells things, the cost of purchasing, manufacturing, and delivering such products is computed separately to arrive at a yearly total known as your “cost of goods sold.” You’ll need to know the cost of inventory at the start and end of the year for this computation. You will also need to know all of the direct and indirect expenditures, such as labor and material costs.
Vehicle Mileage Information
You may incur business driving expenses if you drive your automobile or one owned by your company. To prepare for incorporating these charges on Schedule C, you must first understand:
When did you buy and start operating your automobile or another vehicle (month/day/year)?
- Total number of miles driven in the automobile
- Total number of business miles (deductible)
- Total number of commuting miles (nondeductible)
- Other miles driven total (nondeductible)
On Schedule C, you’ll also have to answer questions regarding whether you have documentation to support your deduction and whether it’s in writing.
The IRS scrutinizes this deduction, so make sure you have sufficient evidence for claiming driving kilometers.
Information Regarding the Commercial Use of Your Home
Schedule C allows you to deduct the space in your home that you use for business activities, subject to certain conditions and limitations.
It must be utilized only (no personal use) and regularly for your business, either as your main location or as a separate structure for holding inventory or product samples.
To compute this deduction, first, figure out what proportion of your entire home square footage is used by your business. Then you can calculate the deduction amount.
Schedule C: Steps to Completion
Schedule C is divided into five sections, some of which must be completed by all businesses and others that are particular to specific company scenarios.
Identification and Other Details
- Line B: The code for your primary business or professional activity. Your business code for delivery service can be found on pages C-18 of the Schedule C Instructions.
- Line D: Enter your employer identification number (EIN).
- Line F: Indicate your company’s accounting approach. (Cash accounting is used by the majority of small firms.)
- Line G: Respond to the inquiry concerning “material participation” if your company suffers a loss.
- Line I: For payments you made, you may have been required to file one of numerous 1099 forms.
Forms 1099-NEC and 1099-MISC are examples.
Part I: Earnings
The revenue recording procedure leads you through various forms of income to calculate gross income on Line 7:
- Gross revenue or sales
- Taking into account returns and allowances
- Less the cost of items sold (from Line 42)
- In addition, there are various sources of income, such as interest, refunds, and tax credits.
You’ll input this information on Line 29, then deduct total expenses (Line 28) to generate a rough profit or loss.
Expenses (Part II)
- This section is for business expenses that are tax deductible.
- Each expense must be for your trade or business and must be as follows:
- Ordinary (common and accepted) (common and accepted)
- Necessary (useful and appropriate) (helpful and appropriate)
- Some observations on some of the more common items on this list:
- Line 9 automobile and truck charges are the business driving miles you calculated.
- Depreciation is a yearly deduction for long-term assets such as automobiles, buildings, equipment, and furnishings owned by your company.
- State income taxes and certain employment taxes are included in Line 23, but not federal income taxes.
With a few exceptions, line 24b meals are normally deductible at 50%. Enter your calculation using the simpler technique for your home office area on line 30. Fill out Form 8829 and attach it to your Schedule C to calculate your actual expenses. Line 31 represents your net profit or loss (line 29 net profit or loss minus line 30). This is your company’s net income, which you’ll report on Form 1040.
Part III: Selling Price
This is where you enter the data from your cost of goods sold calculation, with the total to be entered on line 4 on page 1.
Part IV: Vehicle-Specific Information
- Enter the data you gathered to compute your business-driving deduction.
- Calculate depreciation on your company’s automobiles using Form 4562.
Part V: Miscellaneous Expenses
Use this part to claim costs that you were unable to cover in other sections of your Schedule C:
- Amounts of amortization vary.
- Debt collection
- A fraction of your beginning fees for a business you launched this year
How to Include Schedule C in Your Tax Return
Depending on whether you make a profit or a loss, there are numerous processes to adding your Schedule C information to your Form 1040. Enter the amount on Line 31 if you made a profit for the year—that is, if your total income was larger than your total expenses. Then fill out the forms required.
Last Words
You do not need to submit a Schedule C for the year if your small business had no income or expenses. However, if your business is dormant and you got any money (for example, from insurance), you must file Schedule C to report those payments.
