Line G: Asks if you “materially participated” in the business during this tax year.More on the difference between cash and accrual accounting and how to choose here! Many small business owners choose cash accounting since it only makes them pay taxes on the money they actually have in their bank accounts. You should choose cash or accrual from the start of your business, and ideally stick to it as changing down the road is a bit of a pain. Line F: Asks you to specify your accounting style.More on deciding if you need an EIN (and how to create one) here! You might not have one of these, and that’s fine! If you have one, fill it in here in addition to your SSN above. Line D: Asks for your Employer ID number (EIN).Do your best to find the industry that feels most related, and don’t fret over this too much the IRS uses this to track the growth of different industries, so you won’t be dinged for getting it “wrong.” Choosing which code best applies to your business can take a bit of creativity because, frankly, the list is a bit out of date when it comes to today’s careers. Line B: Asks for the employer code for your principal business-you can find these codes on the last two pages of the Schedule C instructions.For instance, while doing graphic design and copywriting for websites could be combined into one business (and filed together) a bakery and a graphic design business would need two separate forms. Line A: Asks for information on your principal business-basically, what does your business do? Don’t make this too complicated, just give the elevator pitch version of the general field or activity of your business, like “freelance writing” or “wedding photography.” If you have several distinct lines of business that you’ve made money from, you’ll need to file a separate Schedule C for each one.Most of this information should be pretty self explanatory, but there are a few spots that occasionally trip people up: Give Them the Basic Info About Your Businessīefore we get into the numbers, you have to let the IRS know who you are and what your business is.
Now, let’s dig into exactly what you’re reporting to the IRS on Schedule C. If you’re using any other type of business structure-like an LLC or partnership-you may need different forms to file your taxes. The Schedule C is meant for Sole Proprietors who have made $400 or more in gross income from their business that year. When you’re starting a new business, everything is already overwhelming enough-forget having to fill out new and unfamiliar forms come tax time!Īnd the Schedule C can look like a doozy, but I promise, it’s not that difficult (especially if you’ve been staying on top of your accounting throughout the year).įirst, let’s quickly make sure you’re filling out the correct form.
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