Answers · Individual tax · Form 1040
What Is Schedule C?
Schedule C reports a sole proprietorship or disregarded single-member LLC business activity for federal income tax.
How it works
The rule, and what it turns on.
Gross receipts are reduced by COGS where applicable and allowable business expenses; net profit generally feeds Schedule SE.
Example
$100,000 gross receipts less $30,000 deductible expenses produces $70,000 Schedule C profit before other items.
Common mistakes
What we see go wrong, and what we do instead.
- Deducting personal expenses.
- Using Schedule C for an S corporation.
A better approach
- Maintain separate business books and reconcile gross receipts to 1099 forms.
Authority
Where this comes from, so you can check it.
IRC §162(a) (ordinary and necessary trade or business expenses); IRC §262 (personal expenses generally nondeductible). IRC §§1401-1403; Schedule SE and instructions; IRS Publication 334.
Relevant case law
Welch v. Helvering, 290 U.S. 111 (1933) - foundational interpretation of “ordinary and necessary.”
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
Have this question about your own books?
Thirty minutes with someone who does this every day, and you will know where you stand. No obligation.