The centerpoint of doing your taxes when you have your own business is Schedule C. This is where you enter most of your business’s income and deductions. Let’s take a step-by-step look at filling out the form.
On the Your Business screen on your 1040.com return, you’ll first provide some identifying information about your business. The title doesn’t have to be anything formal, and can just be your name. We’ll also ask for your Employer Identification Number (EIN), if you have one. In the the business code box, search for a descriptive keyword that’s often associated with businesses like yours.
Remember: Each Schedule C is for the profit or loss from just one business, so if you had more than one business, use a screen for each.
Income – The Heart of Schedule C
Now we get into the real meat of the Schedule C. Part I – Income starts by asking if your business had any income. If you answer Yes, you’ll get a couple of fields for that income. (Important to note here is that 1099-MISC income is actually entered on a 1099-MISC screen, and that then flows the income to your Schedule C. A bit more complicated, but that’s the way the IRS wants it.)
Once you’re done with income, it’s time to move on to expenses. Once again, answer Yes to show the various boxes for expenses your business paid during the year.
Most of the lines are pretty straightforward – fields for items such as advertising expenses, office expenses, supplies, and so forth. For each line, click the Add button, then a description and an amount. New lines are added automatically. When you’re done, slick Save. Proceed through the rest of the expense areas, and click Save to proceed.
Up next is inventory. Think retail inventory here. If you sell items, but not as the main part of your business, you may not need to enter anything in this section. A mechanic who charges for parts, for example, probably wouldn’t use this section. His parts supplier, however, would.
Next, we ask for the type of accounting method your business uses. If you’re not using the cash method, your choices are the accrual method or “Other.” The accounting method is all about how and when you count income and expenses for your business. With the cash method, you report income in the year it’s received, and deduct expenses in the year you pay them. With the accrual method, income is reported in the year it’s earned, and expenses are deducted in the year they’re incurred – even if you receive the income or pay the expenses in a future year. For more info on this, see Publication 583 – Starting a Business and Keeping Records.
If you need to change or correct something about your business, just click Federal Taxes > Review on the left, then the link for “I’d like to see all federal forms.” In the section called My Forms, find and click on the form in the list. YouAnd if you need another My Business screen, click the Add form button.