IRS Schedule C is completed by reporting business income and expenses in a defined order that follows the structure of the form and the official instructions. The process moves from identifying the business, to reporting income, to accounting for costs and expenses, and ends with determining net profit or loss.
Prepare Before Completing the Form
Before filling out Schedule C, business records and supporting information should be gathered so each section can be completed accurately. A preparation-focused overview of required information is provided in Schedule C Checklist.
Enter Business Information
The form begins with basic business details, including the business name, principal activity, and accounting method. This information establishes the context for the income and expenses reported later on the form.
Report Gross Receipts and Income
Gross receipts or sales are reported first to reflect total business income before expenses. Adjustments for returns and allowances are made to arrive at gross income. What qualifies as gross receipts is explained in Gross Receipts and Business Income.
Account for Cost of Goods Sold
If the business sells products, cost of goods sold is calculated to reflect inventory-related costs. This step adjusts income before expenses are applied. How this calculation works within Schedule C is explained in Cost of Goods Sold in Schedule C.
Report Business Expenses
Ordinary and necessary business expenses are reported using the standardized categories provided on Schedule C. These expenses reduce gross income to determine the business result. Expense categories and definitions are explained in Business Expenses in Schedule C.
Determine Net Profit or Net Loss
After income and expenses are reported, Schedule C calculates a net profit or net loss for the business. This figure represents the overall result of the activity for the year. How profit and loss are determined and interpreted is explained in Understanding Profit and Loss.
Review Line-by-Line Details
Each part of Schedule C contains specific lines that serve different reporting purposes. A structured explanation of how each part functions is available in Schedule C Line-by-Line Explanation.
After Schedule C Is Completed
The completed Schedule C is included with Form 1040, and the resulting profit or loss may affect other schedules. How Schedule C results connect to self-employment tax is explained in Schedule C and Schedule SE. Filing timing is covered in Schedule C Due Date.
Official Instructions and Reference
The official IRS instructions provide authoritative definitions and rules for completing Schedule C. An overview of how to use those instructions is available in Schedule C Instructions Overview. The official form and instructions issued by the Internal Revenue Service are available in the reference entry at IRS Form 1040 Schedule C.