Preparing Schedule C

Sections Included in Schedule C

  • Page One:
    • In the top section, you enter certain nonfinancial information here. For example, your name, your principal business or profession, and your accounting method.
    • Part I: Income
    • Part II: Expenses
  • Page 2:
    • Part III: Cost of Goods Sold
    • Part IV: Information on Your Vehicle
    • Part V: Other Expenses

Schedule C-Page 1, Top Section:

Most of the information in this section is self-explanatory. However, there are some line items worth noting.

Line G asks if you materially participated in the operation of the business.

  • If you work at least 10 hours per week (500 hours per year), check the Yes box.

Line H asks if you started or acquired the business during the current tax year.

  • First year of operations:
    • If this is the first year of operations for the business, place a checkmark in the box.
  • Resuming the same business started in a prior year:
    • If you started this business in the past, then, for some reason, the business remained inactive for one or more years, and now you're going back into it again, place a checkmark in the box.

Schedule C-Part IV: Information on Your Vehicle

This part of Schedule C asks for:

  • Business/investment miles driven during the year
  • Commuting mileage driven, and
  • Personal miles driven (excluding commuting mileage).

Complete Part IV only if:

  • You're claiming car or truck expenses on page 1, line 9 and
  • if you're not required to file Form 4562, Depreciation and Amortization for this business.

You're not required to file Form 4562 if:

  • you already filed this form in a prior year and
  • have not placed any equipment in service in the current year.

Exception for listed property: You must file Form 4562 for listed property which was placed in service in a prior year.

Certain property used less than 100% for business is classified listed property. For example, if you use your computer and car for both personal and business purposes, these items are classified as listed property.

However, if such property was used 100% for business it is not classified as listed property

When Part IV does not have to be completed:

If you are required to complete Form 4562, it is not necessary to complete Part IV of Schedule C.

Form 4562, Part V, Section B asks for the same mileage information.

There are two methods for claiming car and truck expenses:

  • The actual expenses method, and
  • The mileage allowance method (if you use this method you don't have to figure depreciation).

Schedule C-Part V: Other Expenses

List expenses in this part that are not included on lines 8-26 or line 30 (expenses for business use of your home).

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