Self-employed individuals, sole proprietors and the single-owner of an LLC use Form 1040 Schedule C, otherwise called as, “Profit or Loss from Business Form”, to report income during the taxable year. It includes lists of the business income as well as the net profit or losses of the business, report of wages, and ordinary expenses of a statutory employee. It also determines the personal income tax liability from any loss as well as the self-employment taxes due.
Requirements for a business to qualify under IRS policies:
- The main purpose of the activity is to make profit or income.
- The taxpayer regularly and continuously works in the said business.
The following are deductible expenses:
- Business- related expenses
- Hobby expenses commensurate to recreation or hobby income
- Automobile expenses the actual cost or standard mileage rate)
- Depreciation of property (property generally depreciates after a year of use)
- Long distance-business related calls
- Business-related travel expenses
Category: Tax Return Forms, and Tax deductions. This form is used by sole proprietors, single-owner of an LLC, and self-employed individuals to report the income earned as well as the losses suffered during the taxable year. It also allows deductions on business–related expenses.
Link to IRS website: http://www.irs.gov/pub/irs-pdf/f1040sc.pdf