Schedule C Form Instructions
- What do I enter for business description?
- What if I don't have an Employer Identification Number (EIN)?
- How do I receive an Employer Identification Number (EIN)?
- What is an accounting method?
- What is the cash method?
- What is the accrual method?
- What are deductible vehicle expenses?
- When is the standard mileage rate NOT allowed?
- What are actual car expenses?
- Can I deduct parking fees or tolls if I take the standard mileage rate?
- Can I deduct the amount paid for self/family medical insurance coverage?
- Can I take the Self-Employed Health Insurance Deduction if I had a net loss for the year?
- How much of a deduction can I take?
- Should my Form 1099 MISC income be reported on Schedule C ?
- What evidence do I need to support my vehicle expense deduction?
- What business transportation costs can I deduct?
- Who can deduct expenses for business use of a home?
- Does my home office qualify as a principal place of business?
- What expenses can I deduct if I operate a daycare facility?
- What mortgage interest is deductible for the home office deduction?
- What is Excess Mortgage Interest?
- Can I deduct the rent I pay for my home?
- Can I deduct the interest on my car loan even if I use the standard mileage rate?
- Are household expenses and repairs deductible?
- How is the depreciation on my home office figured?
- Can I take depreciation on my computer and cell phone that I used for business purposes?
- Can I take the Section 179 Expense Deduction on property used only partially for business?
- What property qualifies for the Section 179 Expense Deduction?
- What meal and entertainment expenses can I deduct and at what rate?
- How do I match my 1099-MISC with a Schedule C ?
- I am a contractor and do not have a business. How do I enter my 1099-MISC without entering a business?
- I have a 1099-MISC with Box 7 nonemployee compensation. I don't have a business, why do I have to do a Schedule C ?
If you owned more than one business, you must complete a separate Schedule C for each business.
An Employer Identification Number (EIN) is required if:
- Your business has employees to whom you pay wages.
- Your business has a qualified retirement plan.
- You are required to file an excise or Alcohol, Tobacco and Firearms (ATF) tax return.
- Your business is a payer of gambling winnings.
- Online by clicking on the EIN link at www.irs.gov/businesses/small
- By telephone at 1-800-829-4933
- By mailing or faxing Form SS-4 (Application for Employer Identification Number) with the IRS.
Using the cash method, include in your gross income all items of income you actually or constructively received during the tax year. If you received property or services, you must include their fair market value in income. "Constructive receipt of income" is when an amount is credited to your account or made available to you without restriction.
You must report the income in the year the property is received or made available to you without restriction. You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income.
For example, if a customer mails a check to you on December 31, 2014, and you receive the check on January 4, 2015, you will include the check as income on your 2014 tax return.
Local transportation expenses include the following:
- Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Your "tax home" is defined as your regular place of business. It includes the entire city or general area in which your business is located.
- Visiting clients or customers
- Going to a business meeting away from your regular workplace
- Getting from your home to a temporary workplace when you have one or more regular places of work (These temporary workplaces can be either within the area of your tax home or outside that area.)
You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. These costs are personal commuting expenses.
- Operate five or more cars at the same time
- Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS
- Claimed a Section 179 deduction on the car
- Claimed the special depreciation allowance on the car
- Claimed actual car expenses for a car you leased
- Are a rural mail carrier who received a qualified reimbursement
- Lease Payment
- Registration Fees
- Garage Rent
- Parking Fees
You can also include health insurance paid for children under the age of 27, even if the child is not your dependent.
The insurance plan must be established under your business.
If you were eligible to participate in any subsidized health plan maintained by your or your spouse's employer for any month or part of a month, do NOT include amounts paid for health insurance coverage to calculate the deduction.
Medicare Part B premiums can be used to figure the deduction.
Also, amounts paid for health insurance coverage from retirement plan distributions that were non-taxable cannot be used to figure the deduction because you were a retired public safety officer.
You can only take this deduction if you have a net profit from self-employment for the year.
If your deduction is limited, any remainder may be deducted on Schedule A, along with other medical and dental expenses.
If it's for work you did on the side, such as consulting income or any type of income that you received for services you did, then it is shown on Schedule C and requires self-employment taxes to be paid.
There must be evidence available, or the deduction is not allowed. Written evidence is the best evidence, but is not absolutely necessary for claiming the deduction.
- Traveling from one workplace to another workplace when traveling within the "tax home" area
- Going to a business meeting or other related business function away from the taxpayer's regular workplace
- Visiting clients or customers
- Getting from the taxpayer's home to temporary workplace (either within the taxpayer's tax home or outside that area) when they have one or more regular places of work
- Your principal place of business for any of your trades or businesses
- A place of business used by your patients, clients, or customers to meet or deal with you in the normal course of your trade or business
- In connection with your trade or business if it is a separate structure that is not attached to your home
- You use it exclusively and regularly for administrative or management activities of your trade or business.
- You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
To qualify for this exception, you must have applied for (and not have been rejected), been granted (and still have in effect), or be exempt from having a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law.
If you are using the simplified method to report home business expenses: You should enter the entire amount of mortgage interest only in the Form 1098 area of the Itemized Deductions section. You do not need to enter any mortgage interest in the Home Office section of your Schedule C. Instead, choose Yes to the question that asks if you would like to use the simplified method to report home business expenses.
If you are NOT using the simplified method to report home business expenses: You should enter the entire amount of mortgage interest in both the Home Office section and the Form 1098 area of the Itemized Deductions section. We'll automatically split the amount that you enter based on how much of your home is used for the business.
For example, suppose that you have $10,000 of mortgage interest and $2,000 in property taxes and the home office percentage of your home is 10%. You would enter the entire $10,000 and $2,000 as indirect expenses on the Home Office Information screen. $1,000 ($10,000 * .10) of the mortgage interest and $200 ($2,000 * .10) of the property taxes and will show up on Form 8829 as a home office deduction.
You would also enter the $10,000 of mortgage interest and $2,000 of property taxes in the Itemized Deductions section. The software will reduce the $10,000 by the $1,000 already taken on Form 8829. So $9,000 of mortgage interest will show up on Schedule A. The $2000 in property taxes will also be reduced by the $200 on Form 8829 and show $1,800 in property taxes on Schedule A.
In order to deduct your rent, one of the following must apply:
- You use part of your home exclusively and regularly as your principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home.
- You use part of your home on a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.
For example, if you paid $1000 of interest on your car loan and used the vehicle 70% for business use and 30% for personal use, you can deduct $700 on Schedule C. The remaining interest isn't deductible on your tax return.
Expenses such as painting your home or fixing the roof of your home are deductible and can be prorated according to the percentage of your home used for your business.
For example, a furnace repair benefits the entire home. If you use 10% of your home for business, then you can deduct 10% of the cost of the furnace repair.
Costs of landscaping and lawn care are NOT deductible.
Furthermore, your computer or cell phone must satisfy a business condition of your employer.
The IRS requires proof that you need your own computer to perform your job because your employer does not provide one, or because the computer provided by your employer is not sufficient for your job.
Certain depreciable property is NOT eligible for the Section 179 Expense Deduction. This includes:
- Real property (Land and the building on the land)
- Air conditioning and heating units
- Furnishings and rental lodging
You cannot deduct any expense paid or incurred for a facility (such as a yacht or hunting lodge) used for any activity usually considered entertainment, amusement, or recreation.
Also, you cannot deduct membership dues for any club organized for business, pleasure, recreation, or other social purpose. This includes country clubs, golf and athletic clubs, airline and hotel clubs, and clubs operated to provide meals under conditions favorable to business discussion. But it does not include civic or public service organizations, professional organizations (such as bar and medical associations), business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards, unless a principal purpose of the organization is to entertain, or provide entertainment facilities for, members or their guests.
Standard Meal Allowance - Instead of deducting the actual cost of your meals while traveling away from home, you can use the standard meal allowance for your daily meals and incidental expenses. Under this method, you deduct a specified amount, depending on where you travel, instead of keeping records of your actual meal expenses. However, you must still keep records to prove the time, place, and business purpose of your travel.
The standard meal allowance is the federal M&IE rate. You can find these rates at www.gsa.gov. Click Per Diem Rates for links to locations inside and outside the continental United States. Also, see IRS Publication 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel.
Amount of Deduction - Generally, you can deduct only 50% of your business meal and entertainment expenses, including meals incurred while away from home on business. For individuals subject to the Department of Transportation (DOT) hours of service limits, that percentage is increased to 80% for business meals consumed during, or incident to, any period of duty for which those limits are in effect. Individuals subject to the DOT hours of service limits include the following:
- Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations
- Interstate truck operators who are under DOT regulations
- Certain merchant mariners who are under Coast Guard regulations
Daycare Providers. If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. See IRS Publication 587 for details, including record keeping requirements.
If you're filing a joint return with your spouse, make sure that the business owner for the Schedule C on the Basic Business Information screen matches the person who received the 1099-MISC
I am a contractor and do not have a business. How do I enter my 1099-MISC without entering a business?
Click on the Business Income (Schedule C) link in the Business Income section of the menu. Add a business record. On the Basic Business Information screen, just enter a short description of the type of work you did for the business description. If you did consulting work, type in something like business consultant or consulting service for the business description. Select the business code that best describes the type of work you are doing. Select "Cash" as the type of accounting method used. All of the other questions usually can be left blank. Then on the next screen, you select the checkbox for the Form 1099-MISC income that relates to the Schedule C. The next screens will ask for business expenses, but if you do not have any, you can just keep going through those screens without entering anything. Your 1099-MISC income will then correctly show up on Schedule C and be subject to the self-employment taxes.