Introducing Schedule C
Updated: May 11, 2020
Introducing Schedule C
So you’ve opened your own business. Congratulations! It takes a lot of courage, organization and commitment to be your own boss. If you are a sole proprietor you now need to be acquainted with I.R.S. Schedule C. Sole proprietors use Schedule C to report profit or loss from doing business. An activity qualifies as a business if its primary purpose is for income or profit and the proprietor is involved in the activity with continuity and regularity.
Schedule C is completed along with your annual form 1040. The schedule itself is just two pages long and broken down into five sections:
I – Income
II – Expenses
III – Cost of goods sold (if your business involves sales)
IV – Information about your vehicle (if you are claiming car or truck expenses)
V – Other expenses (this section is for any expenses not otherwise claimed in section II)
It is important for a business owner to keep complete and accurate records. This is typically done with some form of software such as Quickbooks® or Peach Tree®. However, computerized records are not required. In some cases, a pen and pencil may prove adequate as long as the records are organized, complete and accurate.
Keeping accurate records can be easier said than done; especially while juggling a new business. The first year of business can be overwhelming and tedious. If you keep your own records, it is critical that you devote time EVERY WEEK to this task. One approach is to maintain a ledger and accordion file of all business receipts labeled with the five categories mentioned above (Income, Expenses, etc). Don’t forget to include cash transactions such as tips! You will need to keep track of those as well.
Your business record keeping is as important as your other business activities. When it is time to complete Schedule C, you will be glad you devoted the time to keeping accurate records. If the thought of filing Schedule C is overwhelming, the experts at Heritage Income Tax will help you take the stress out of filing your tax return.
 The author, Bryan Corcoran, Esq, is a retired Marine Judge Advocate. He earned his J.D. and Masters in Taxation from the University of Akron in 1997. He is currently a Tax Analysts for Heritage Income Tax. The views expressed in this paper are his own, and are not intended as a substitute for professional tax planning or legal advice.
 For the sake of simplicity, we will focus only on sole proprietors during this discussion. However, Schedule C may apply to other business entities such as Joint Ventures.