You are a sole proprietor if you are the sole owner of a business
that is not a corporation. Report your income and expenses from your
sole proprietorship on Schedule C (Form 1040), Profit or Loss From
Business, or on Schedule C-EZ (Form 1040), Net Profit From Business.
You can use Schedule C-EZ to determine your net profit if you have
only one sole proprietorship and you meet all the following
requirements; your business expenses were not more than $2,500, and
you did not have a net loss from your business, you use the cash
method of accounting, and you did not have an inventory during the
year. There are five other requirements, see page 1 of Schedule C-EZ
to see if you qualify. If you can use Schedule C-EZ, gross receipts
from your business and total expenses are reported in Part II. The
difference between gross receipts and total expenses you reported is
your net profit. Net profit is reported on line 12 of your Form 1040.
If you cannot use Schedule C-EZ, you must report your business income
and expenses on Schedule C.
If you have more than one sole proprietorship business, or if you and
your spouse have separate businesses, you must use a separate
Schedule C for each business.
Report the income from your business in Part I of Schedule C and the
expenses in Part II. If you make or buy goods to sell, use Part III
to figure the cost of goods sold. The difference between total income
and total expenses is your net profit or loss, which will be taken
from Schedule C and entered on line 12 of your Form 1040.
If you use part of your home in your business, you should complete
Form 8829, Expenses for Business Use of Your Home. For more
information, see Publication 587, Business Use of Your Home,
Including Use by Day-Care Providers, or refer to Topic 509.
If the total of your net self-employment income from all businesses
is $400 or more, you must pay into the Social Security System by
filing Schedule SE (Form 1040). For more information on this, see
Publication 533, Self-Employment Tax, or refer to Topic 554.
If you are new in business, you may want to see Publication 583,
Starting a Business and Keeping Records. Publication 334, Tax Guide
for Small Business, has more information on income and expenses from
a sole proprietorship.
Tax Topics & FAQs | Tax Help Archives | Home