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 may use Schedule C-EZ to determine your net profit if you have
only one sole proprietorship and you meet all the requirements listed in
Part 1 of Schedule C-EZ. 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.
Report Net profit on line 12 of your Form 1040.
You cannot use Schedule C-EZ if your business expenses were more
than $2500, your business used the accrual method of accounting, you deducted
expenses for the business use of your home, or if you had employees, a
net loss, or inventory.
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 deduct these expenses,
you must use Schedule C.
If you use part of your home in your business, you should complete
Form 8829. For more information,
see Publication 587, Business
Use of Your Home, Including Use by Day-Care Providers. You may also
select Topic 509.
If the total of your net profit from all businesses is $400 or more,
you must pay into the Social Security System by filing Schedule SE (Form
1040). For more information, get Publication
533, Self-Employment Tax, or select Topic
554.
If you are new in business, you may want to see Publication 1635,
Understanding Your EIN - Employer Identification Numbers. Select
Topic 103, Small Business Tax Education Program,
for additional information on beginning a new business. Publications and
forms may be downloaded from
this site or ordered by calling 1-800-829-3676.
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