Desktop: Schedule C - Business Income/Loss
Creating/Editing Schedule C - Business Income/Loss
Entering A New Schedule C
To enter a new Schedule C;
- Go to the Main Menu of the tax return (Form 1040)
- From the menu, select Income
- Proceed to Business Income/Loss (Sch C, 1099MISC)
- In case you have Schedule Cs from the prior year whose data you would like to pull forward, select Pull. otherwise, select New.
- In the event that you file an MFJ return, you will be required to indicate who the Schedule C is for; the taxpayer, their spouse or if it's a joint venture.
- Insert the Principal Business Activity Code. the IRS uses this code for classification of the type of businesses. In case you do not know this code, you can use either of the two ways below to find it;
- Click on the icon that is above “Click Here To View Entire List of Codes”. The list will be displayed in PDF form. Go through the list and identify the appropriate code for your business then enter the code.
- Click on the icon that is above “Click Here For Business Categories” to look for the category that suits your business. Under “Select the Principal Business Category” there is a dropdown menu. In the menu, select the business’ broad category then select the best description that it matches.
- In the Schedule C Data Entry Menu, enter the heading information for Schedule C. this includes the business name, the EIN, and an address.
- There are several items that ought to be reviewed in the Schedule C Questions Menu. This menu’s questions have been defaulted to the taxpayers’ most common answers. It is however advisable that you review these questions, ensuring that the correct answer has been provided for the taxpayer’s situation. You may be required to adjust some items to portray the operation of the taxpayer’s business.
- Enter the amount of unallowed loss on the Questions menu, incase there was one from the previous year. CAUTION: you should only enter this amount in the event that the activity of the current year is a net profit. In case you enter an amount here but have a net loss in the current year’s activity, an incorrect calculation will result.
- Income produced from the business is entered on the Income Menu of Schedule C. To enter the income;
- On the Schedule C - Edit Menu, select Income.
- The income items are broken down into various sections.
- The Income is to be entered in the Gross Receipts or Sales Menu.
- In the event that throughout the year there was an inventory being kept, enter the beginning as well as the ending inventory amounts in the Cost of Goods Sold section. You should also enter labor cost as well as the amount used in the purchase of materials and supplies for the business.
- Expenses. To enter the expenses that the business incurred, go to the Schedule C - Edit Menu then select Expenses. There are expense items that can be deducted. These include repairs, advertising, utilities, meals and entertainment. You can enter the depreciation and car and truck expense, f0r instance standard mileage and the actual expenses can all be entered in the expense menu. Further information on how to enter expenses and depreciation is below.
Editing a Schedule C Entry
- Go to the Main Menu of the Tax Return (Form 1040)
- From the menu, select Income
- Then proceed to Business Income/Loss (Sch C, 1099MISC)
- Choose the entry then click Edit. you could also double click on the entry that you want to edit.
- Make adjustments to the information as required.
Deleting a Schedule C Entry
- Go to the Main Menu of the tax return (Form 1040)
- From the menu select Income
- Proceed to Business Income/Loss (Sch C, 1099MISC)
- Choose the entry to highlight the Schedule C entry you would wish to delete.
- Click on the delete button that is on the screen, or the Delete key on your keyboard.
- A prompt will appear, asking you to confirm whether you want to delete the entry. Select YES.
Schedule C Expenses
In the Expenses menu, the business expenses can be deducted. Create supporting notes when entering the expenses so as to keep track of every expense. For instance;
- Select the F10 key on your keyboard when entering Supplies.
- Click on the New button then enter a description of the expense, such as Paper.
- Key in the amount spent then press the enter key.
In the event that there are several items falling under the supplies category, to enter them, repeat the above process. The amounts that are entered for the items will be summed up and carried to the expense line. When the return is printed, a supporting statement will automatically be generated. This statement lists all the items.
Car & Truck Expense
You can use either the Standard Mileage or the Actual Expense methods to deduct vehicle expenses. Take note that for a vehicle, only one method may be applied. Check out Section 4 of Publication 463 for the rules and qualifications.
Incase there are several vehicles that are to use the standard mileage rate:
- Go to the Schedule C - Edit Menu
- From the menu, select Expenses
- Then select Car & Truck
- Proceed to Car & Truck (Std Mileage Rate - Form 4562)
- Click on Enter/Edit Vehicles
- Select New
- Enter the date the vehicle was placed in service, the Business Miles, Commuting Miles and the Personal Miles Driven.
- Ensure that you provide responses to all the questions about the vehicle.
Vehicle Depreciation and Expenses
To enter an asset in the Depreciation Module:
- Go to the Schedule C - Edit Menu
- From the menu, select Expenses
- Then Depreciation
- Proceed to Depreciation Module
- Either select New or double click on the entry you want to Edit. If you prepared the previous year’s return using the software, select Pull inorder to pull the data forward.
- You will then land on the Depreciation Data Entry Screen - Enter the description of the asset, the date it was placed in service, its cost as well as the percentage of business use. In the event that you do not know the actual expenses, you can find out the amount when asked for the business, commuting and personal mileage. Enter the business mileage then enter 0 (zero) for the commuting and personal mileage in the event that the percentage of business use is 100%. However, in the event that the business use percentage is not 100% and it is your desire that the program calculate it on your behalf, then, you will have to enter the business, commuting as well as the personal miles. The program will duly calculate the business percentage off of the entered mileage. Enter the Section 179 Deduction in the event that the taxpayer is taking this deduction any accumulated depreciation as well as the property class.
- Select Listed Property followed by YES.
- Select the Type of Listed Property
- Enter the Mileage after which you will be asked to enter the Actual Expenses (which are items such as oil, tires, gas, repairs, etc.)
- Before you proceed, ensure that you have answered all the questions pertaining to the vehicle.
If there are other vehicles that you have and will be claiming Actual Expenses, repeat the above steps.
Listed Property can be any of the following:
- Passenger automobiles that weigh up to a maximum of 6,000.
- Property used for transportation, unless it is categorised as an expected vehicle (this is normally a vehicle whose normal use does not include personal reasons.)
- Property that is normally used for purposes of entertainment, recreation, or amusement.
- Computers as well as related peripheral equipment, unless they are only used at a regular business establishment and either owned or leased by the operator of the establishment. A regular business establishment is inclusive of part of a dwelling place that is utilized regularly and exclusively for business, as encompassed in Publication 587.
- Cell phones and similar telecommunication devices.
Improvements to listed property - Improvement made to listed property that has to be capitalized is regarded as a new item of depreciable property. The method of depreciation as well as the period of recovery that apply to the listed property are the same ones that are applied to the improvement. For instance, if you use the straight line method to depreciate a listed property, the improvement must also be depreciated using the straight line method.
Royalty Income on Schedule C
In case the taxpayer is a self employed writer, artist, or inventor, their royalty income generated from copyrights they own in connection to the self employment are taxable and should be reported on Schedule C. In the event that the taxpayer is not self employed, royalties from copyrights are not subject to self employment tax and reported on Schedule E.
In case the royalty income had been reported on Form 1099-MISC, you can enter that form in two places:
- Go to the Main Menu of the tax return (Form 1040)
- From the menu, select Income
- Then select Form 10099-MISC
- Enter the 1099-misc. In case the income is present in Box 3, Other Income, click on the Link checkbox that is above the entry field.
- Go to the Schedule C Edit Menu
- From the menu, select Income
- Then select Form 1099-MISC - Gross Receipts of Form 1099-MISC - Other Income.
Note: This is not tax advice. It is a guide on how to create and edit Schedule C in the Taxx Savage Pro program.
Additional Information:
IRS: Instructions for Schedule C - Profit or Loss From Business
Publication 334, Tax Guide for Small Business
Publication 535, Business Expenses