What Is a Schedule C Form? It’s Your Business’s Net Profit or Loss
A Schedule C form is the tax form used by a sole proprietor to calculate his business’s net profit or loss. This amount will then be used on the proprietor’s personal income tax return to figure out his total tax liability for the year. The Schedule C form is submitted as part of an income tax filing.
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NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area.
Do I Have to File a Schedule C?
Yes, all sole proprietorships must file a Schedule C (“Profit or Loss from Business/Sole Proprietorship”) with their taxes. A Schedule C form is a detailed form as figures for income, expenses and cost of goods sold all need to be recorded. A net profit or loss figure will then be calculated, and then used on the proprietor’s personal income tax return (on form 1040).
Typically, a sole proprietor files his personal and business income taxes together, on one return. This type of business is referred to as a “pass-through” entity. This means the profit is only taxed once.
What Is the Minimum Income to File Schedule C?
There is no minimum income to file the Schedule C. All income and expenses must be reported on the Schedule C, regardless of how little you earned. If you meet certain criteria — detailed below — you may be able to file the Schedule C EZ instead.
There is a minimum threshold of $400 for paying self employment tax. If you earn less than $400, you won’t be required to pay that tax. But don’t get that confused with not needing to report your self-employment income. You need to report all self-employment income.
What Is a Schedule C-EZ?
A schedule C-EZ is an abbreviated version of Schedule C, and it is meant for very small businesses. This form can be used instead of Schedule C, when the following criteria are met:
- The business’s expenses were not greater than $5,000 for the tax year.
- The business did not have a net loss.
- The business uses the cash method of accounting.
- There are no employees.
- There is no inventory.
- There was there no deduction for business use of the proprietor’s home.
- There’s only one business.
Is a 1099 the Same as a Schedule C?
A form 1099 is not the same as a Schedule C form.
A form 1099 is a tax form used by companies to report payments they’ve made, other than regular wages, salaries or tips (which are reported through a W-2 form).
If a business provides you with employment, but you do not work for that company full time, then you are considered a freelancer or contractor. You do not fill out form 1099, that company does, and it will include the fees it paid you on that form. It will then file the 1099 with the government, and provide you a copy too so that you can do your personal income tax return using the figure provided.