If you own a sole proprietorship or are a statutory employee where no Social Security or Medicare taxes are withheld, you may need to take an extra step when filing your 1040 tax return. The extra step is to attach IRS form Schedule C to report any profits and losses.

Demystifying the Schedule C

All individuals must file IRS form 1040, better known as the U.S. Individual Income Tax Return. People who work for others and receive a W-2 wage and earnings statement place the amount of total wages on line 7 of form 1040. Sole proprietors, however, must complete a 1040 Schedule C and report business profits or losses on line 12 of the 1040 form. Very often, an individual may have W-2 earnings and business earnings to report.

This IRS schedule is easy to complete as long as you keep accurate accounting records throughout the year of all incomes, inventories and expenses. You can download a copy of this schedule directly from the IRS at http://www.irs.gov/pub/irs-pdf/i1040sc.pdf.

Beyond your basic information such as name, address and social security or tax identification number, this form allows you to report all revenues, expenses, home expenses utilized for business purposes and auto expenses. If you carry inventory, page 2 of the Schedule C allows you to report beginning and ending balances.

Once your profit or loss is determined based on income, minus expenses, the amount shown on the schedule is transferred to line 12 of your 1040 return. This amount may increase or decrease your adjusted gross income depending on whether you had a profit or loss. If your business made less than $5,000 in any given year, you can file Schedule C-EZ which is a more simplified version.

Keep Accurate and Organized Records

By keeping track of revenues, sole proprietors often make estimated tax payments on anticipated earnings using Form 1040-ES (Estimated Tax Payment Voucher). This is done on a quarterly basis and these estimated payments do have deadlines: April 15, June 15, September 15 and Jan 15 of the following year. The rate sole proprietors must pay on estimated income earned is 15.3 percent. If you deem your business will make a profit based on your recordkeeping and you fail to file estimated tax payments, you could end up owing the IRS a large amount at tax time.

Although estimated tax payments are prudent, if your business is new or by reviewing your financial records you realize your business will have a loss, you can choose to skip quarterly payments. However, if you do overpay, expect a refund.

Getting Help

If you fear IRS forms and schedules, you can find qualified accountants and bookkeepers at http://www.sourcefound.com. The SourceFound marketplace is where sole proprietors can go to request help from professionals by describing their needs in a Request form. You can stay anonymous to avoid getting spammed by salespeople. All vendors that provide the service you need can see the request and respond to it. Or, a business may search the directory and contact the vendor directly.

About Jean and Shoofly Writing – To work with online publications offering excellent freelancewriting and social media skills in the areas of business startups and management,funding and loans, human resources and new product lines.
https://www.sourcefound.com/#!biz/jscheid

About Jean and Shoofly Writing – To work with online publications offering excellent freelancewriting and social media skills in the areas of business startups and management,funding and loans, human resources and new product lines.
https://www.sourcefound.com/#!biz/jscheid

Author Bio: About Jean and Shoofly Writing – To work with online publications offering excellent freelancewriting and social media skills in the areas of business startups and management,funding and loans, human resources and new product lines.
https://www.sourcefound.com/#!biz/jscheid

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