The Form 1040 Schedule C is used to report the income or loss from the business that you operate or practiced as a sole proprietor. This article specifies the Federal Form 1040 Schedule C instructions.
Federal Form 1040 Schedule C Instructions
- Filers of Form 1041, do not complete the block labeled “Social Security Number (SSN)”. Instead, you need to enter the Employer Identification Number (EIN) provided to the trust or estate.
- Define the business, that provided the principal source of income should be reported. When you own more than a business, you should complete separate Schedule C for each of the business.
- Enter the six-digit code from the Principal Business or Professional Activity Codes chart.
- Enter the Employer Identification Number (EIN) issued on the Form SS-4. Do not enter the SSN here. When you do not have an EIN, do not enter the Form.
- A taxpayer needs an EIN only when you required to file the employment or qualified retirement plan. When you need an EIN, check the instructions for Form SS4.
- When you are a sole owner of an LLC, which is not a separate entity for federal income tax purposes, you need to have an EIN which is issued to the LLC.
- Enter the business address correctly. Instead of box number, show the street address. Add suite or room number. When your business is conducted from home, you do not have to complete this line.
- Use accrual method, cash method or any other method that is permitted by the Internal Revenue Code. In all the cases, the used method should reflect the income clearly.
- When using the cash method, specify all the taxable income items constructively or actually received during the tax year.
- When using the accrual method, report the income when you receive and deduct the expenses when you incur it even when you are not paying them during the tax year.
- In order to change the accounting method, you need to file Form 3115.
- If you acquired or started the business in the year 2014, the taxpayer is required to file any forms 1099.
- Include the amounts that are received from your business or trade, which are shown on Form 1099 MISC.
- Report the sales allowances and returns as a positive number. A sales return is a credit refund or cash, which is given to your customers who returned the damaged, defective or unwanted products. On the other hand, the sales allowance is the reduction in the selling price of the products.
- When you produced tangible or real personal property or acquired property for sale, certain expenses related to the property must be included in the inventory costs.
- The taxpayer can deduct the actual expenses of the truck or car, else can take the standard mileage rate.
- Enter the total amount of contract labor for the tax year.
- Enter the detection of the depletion in the form.
- Include the expenses for office supplies and postage.
- Enter the deductions for profit-sharing, pension, or plan for the benefit of the employees.
- When you leased or rented the vehicles, equipment, or machinery, enter the business portion of the rental cost.
- Deduct the cost of maintenance and incidental repairs.
- The cost of the supplies and materials can be deducted only to the extent you actually used and consumed in your business during the tax year.
- Enter the transportation and lodging expenses.
- Include the total deductible entertainment and meal expenses.
- Deduct the utility expenses for the business or trade.
This article highlights the important instructions for Federal Form 1040 Schedule C instructions. To know more check the site Tax2efile.com or contact our customer support team.