How to fill out a schedule C

When you are the sole proprietor, or the only owner of a business, when tax time comes around you will need to fill out a form called a Schedule C.This document is used to report any profit or loss that your business had through the year.Here are the steps in filling out this paperwork:

- The first section is simply just your general information.
You will want to fill in your name, your social security number and your address.This information is required.
This section also asks for the business name, if you have one. There is also an area for your Employer ID number, now, you may not have one unless you sell alcohol, firearms, or other products that will require you to have this.If you don't have a number, leave this blank.
The next area asks for your accounting method: Cash, Accrual, or Other, and you must specify how it is done.Check the correct box for your business.
Next, it asks you if you "materially participated" in the operation of this business during the year.This is simply asking if you were actively involved and participated in running the business.
The last question in this section requires you to check the box if you had started your business, or obtained it, within that year.

- The second section will be about your income.
Line 1 asks for your gross receipts or sales.This is the amount of money you received for customers for your products, materials, and/or services.
Line 2 is where you will report any returns or allowances you may have had to pay.
Line 3 asks for the amount of money when you subtract line 2 from line 1.
Line 4 is where you will put the amount of money you actually paid for your products or services that you sold.This number will come from Section 3.
Line 5 is your gross profit.You get this number by subtracting line 4 from line 3.
In line 6 you will put the amount of any other income you may have received through this business.
The last line, number 7, is where you will enter in you gross income, which is produced by adding the last two lines, 5 and 6.

- The third section will require information about your expenses accrued.
This section includes lines 8 to 27.It breaks down into each line different things you may have had to spend money on to run your business throughout the year.This includes; advertising and marketing, commissions, employee wages, benefit programs and insurances, travel, and rent or mortgage payments.
Line 9 of this section will ask for any expenses for a company car or truck.If you put an amount in this box, be prepared to answer more specific questions about this in a later section.
After filling out this section, if you find your overall expenses for the year were $2,500 or less, you will want to fill out a Schedule
C-EZ instead of this form.
- The fourth section is the money amount of your products that you sold.
The first thing it will ask for is your method you used to place the value on your closing inventory.You will choose Cost, Lower of cost or market, or Other.If choosing "other", you will need to attach a thorough explanation.
The next line will ask if you used a different method to determine the value or costs of the opening and closing inventories.If you did, again you will need to explain yourself in an attached document.
The next 5 lines will ask for specific costs that you will then need to add up and put the total in line 40.In line 41, you will need to put the total cost of your closing inventory.You will then subtract line 41 from line 40 which will give you your total cost of goods sold.Enter that number in line 42.
Section 4 is the required information if you are claiming vehicular expenses in section 3.
All information in this section will be referring to dates you used the vehicle for business purposes and if it was solely used for the business.It will ask if you have evidence of this, if you put yes, you will want to make sure you can prove it was not used for personal reasons.
- The fifth and final section will ask you to list all other expenses that you could not include in section 2.List any and add them together.

You will want to be very thorough, detailed and honest in filling out a Schedule C.Be prepared with documents to provide evidence that all expenses claimed were business related. If in doubt, it is best to consult a tax professional.