IRS Schedule C and Schedule SE are used together to report business income and calculate self-employment tax for individuals who operate a trade or business. Schedule C determines net profit or loss from business activity, while Schedule SE uses that result to calculate self-employment tax.
How Schedule C Connects to Schedule SE
The net profit or net loss calculated on Schedule C flows into Schedule SE. This connection explains how business activity reported on Schedule C becomes part of self-employment tax reporting rather than remaining only an income tax item.
Purpose of Schedule SE
Schedule SE is used to calculate self-employment tax based on net earnings from self-employment. It applies to individuals whose Schedule C results represent self-employment income under federal tax rules.
When Schedule SE Is Triggered
Schedule SE is generally completed when Schedule C shows a net profit that meets the threshold for self-employment tax reporting. This linkage explains why Schedule C is often followed by Schedule SE as part of the filing process.
How These Schedules Fit Into Form 1040
Both Schedule C and Schedule SE are included with Form 1040 as part of the individual income tax return. Schedule C establishes business results, and Schedule SE calculates related self-employment tax amounts that flow into the main return.
Profit, Loss, and Special Situations
How profit or loss is determined on Schedule C is explained in Understanding Profit and Loss. Situations involving no income or a net loss are discussed in Schedule C With No Income.
Related Guidance and Reference
A practical walkthrough of completing Schedule C is provided in How to Complete IRS Schedule C. A general overview of Schedule C is available in IRS Schedule C Overview, and the official forms and instructions issued by the Internal Revenue Service are available in the reference entry at IRS Form 1040 Schedule C.