Schedule C, titled "Profit or Loss From Business (Sole Proprietor)," is a federal tax document used in reporting how much money you made or lost in your business for the year. This form is reserved for self-employed individuals who are not set up as a legal business entity and for single-member LLCs. The difference between being self-employed and having a hobby is generally if the activity is done on a reoccurring basis with income being its primary purpose. Running an eBay store on a continual basis for profit -- versus occasionally selling unwanted items -- would make you self-employed.
Filing Schedule C
The first section of Schedule C requires personal information such as the name of the sole proprietor, a Social Security number, a business address and an accounting method. Part I of the form covers income such as gross receipts or sales. Part II covers business expenses such as advertising, car costs and legal services. Part III calculates your cost of goods sold, while Part IV needs to be completed if you are claiming any vehicle expenses. Part V is a fill-in section for any other expenses you wish to deduct not previously covered on the form. Schedule C is typically completed and filed along with Schedule SE, which deals with self-employment tax.
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