Use Schedule C (Form 1040) to report income or loss from a business you operated or a profession you practiced as a sole proprietor. Also, use Schedule C to report wages and expenses you had as a statutory employee. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Form 1040, line 21.
You may be subject to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more information.
Other Schedules and Forms You May Have To File
- Schedule A to deduct interest, taxes, and casualty losses not related to your business
- Schedule E to report rental real estate and royalty income or loss that is not subject to self-employment tax
- Schedule F to report profit or loss from farming
- Schedule J to figure your tax by averaging your farming or fishing income over the previous 3 years. Doing so may reduce your tax liability.
- Schedule SE to pay self-employment tax on income from any trade or business
- Form 3800 to claim any of the general business credits
- Form 4562 to claim depreciation (including the special allowance) on assets placed in service, to claim amortization, to make an election under section 179 to expense certain property, or to report information on listed property.
- Form 4684 to report a casualty or theft gain or loss involving property used in your trade or business or income-producing property
- Form 4797 to report sales, exchanges, and involuntary conversions (not from a casualty or theft) of trade or business property
- Form 6198 to figure your allowable loss if you have a business loss and you have amounts invested in the business for which you are not at risk
- Form 8582 to figure your deductible loss from passive activities
- Form 8594 to report certain purchases or sales of groups of assets that constitute a trate or business
- Form 8824 to report like-kind exchanges
- Fom 8829 to claim expenses for business use of your home
- Form 8903 to take a deduction for income from domestic production activities.
If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Do not use Schedule C. Instead, file Form 1065. See IRS Pub. 541 for more details.
Exception - Qualified Joint Venture
If you and your spouse materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be taxed as a qualified joint venture instead of a partnership. This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage. By making the election, you will not be required to file Form 1065 for any year the election is in effect and will instead report the income and deductions directly on your joint return. If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect.