How to get ready the Easy Part of schedule C
Are you a Sole Proprietor who faces the daunting task of filling out agenda C every year? If you break out into a sweat just thinking about, you came to the right place. To get the most out of this article, get a copy of agenda C and have it in front of you as you read on. You can open up your tax return software agenda to agenda C, download a copy from the Irs website, or use the printed paper version from a recently filed return.
How to get ready the Easy Part of schedule C
Schedule C does have a few tricky parts, but it starts out nice and easy. Let's take a look at the section at the very top of the page, what I call "The Easy Part."
Name - this should be your full legal personal name in the same format as it appears on Form 1040, Page 1. Important: Do not put your business name here; that goes on Line C.
Social security number - again, make sure this matches your Form 1040 info.
Then comes facts that is labeled alphabetically from A to H.
A - needful business or profession. Use a brief narrative of the business activity, such as "pest control" or "retail store" or "consultant".
B - This is a numeric code for your particular business. Refer to the chart on pages 9-11 of the instructions to find the right code for your business. If you are using a software program, this chart is likely built right into the program.
C - business name. If you have one, put that in here. If you don't have a separate business name, which is quite tasteless among self-employed people, leave this line blank.
D - employer Id number. If you have employees, you should have an employer Id number, aka the Federal Id number. But it you don't have employees, you probably don't have an employer Id (which is Ok); if that's the case, leave this blank.
E - business address. If you have a business address that is separate than the home address listed on Form 1040, Page 1, put that here. Otherwise, just use your home address.
F - Accounting method. There are three choices: Cash, Accrual, and Other. Most Sole Proprietors use the Cash method, which means that you narrative wage when it is received and you narrative expenses when they are paid. The Accrual method means that you narrative wage when you have earned the right to receive it, regardless of when it is undoubtedly received; and you narrative expenses when you are legally obligated to pay them, regardless of when you undoubtedly pay them. The "Other" method is used by those who do a blend of both Cash and Accrual. If you are not sure which method to pick, you can read up on this in the agenda C instructions or consult a tax professional.
G - This is a question: Did you "materially participate" in the operation of this business while the year? If you were complex in the business, check "Yes."
H - another question: If you started or acquired this business while the year, check the box. That's a pretty easy question to retort - in other words, is this the first year for this Sole Proprietorship? If so, check the box. If not, leave it blank.
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