• Form 1040, Schedule C, Profit or Loss from Business
The famous “Schedule C” -- the mother of all tax forms for small business -- is where you show your net self-employment income (or loss), which is the result of gross income minus business deductions. Schedule C’s total will be carried onto your main Form 1040 U.S. Individual Income Tax Return which sums up your entire personal tax picture.
Approximately 19 million Schedule C forms are filed in the U.S. annually, so this represents the vast majority of business returns since only six million corporate and 2.5 million partnership returns are filed.
Although these other business entities (partnerships, Limited Liability Companies (LLCs) and corporations) don’t specifically use Schedule C, they roughly follow a similar process for accounting for business income and expenses. Their returns become more complex because, among other reasons, they have diverse options for how profits and losses flow from the business to its owners.
• Form 1040, Schedule C-EZ, Net Profit from Business
You can file this mini Schedule C-EZ if, during the year, you:
Had business expenses of $2,500 or less
Used the cash method of accounting
Had no inventory
Did not have a net business loss
Had only one business as a sole proprietor
Had no employees
Are not required to file Form 4562, Depreciation/Amortization
Do not deduct expenses for business use of your home
Have no prior year unallowed passive losses from this biz
It’s a little piece of cake. Too bad most forms can’t be this easy.
Who doesn’t file Schedule C
If your business is a partnership, it files Form 1065 for annual return of income and distributes K-1 Forms to partners
If you are an individual partner in a partnership, your annual return of income is Form 1065 and Schedule E-3
Corporations (C corps) file Form 1120 or 1120-A to report income, plus 1120-W for estimated tax with Form 8109-2 (a deposit coupon)
If you are the S corporation shareholder, you file file Form 1040 and Schedule E-3 -- then 1040-ES for estimated tax
LLCs (Limited Liability Companies) can elect whether to be treated as a corporation or a partnership. Check with your accountant about which way you should go and what forms you’ll file.
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