Since Schedule C is the primary method through which sole proprietors report their earnings, tax pros catering to clients who own small businesses must be adept in its preparation. It’s a cornerstone of tax compliance for this demographic, requiring attention to detail to accurately reflect the financial activities of the business.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Is it true you can still deduct the cost of goods sold (COGS) related to your hobby if you sell items?
A: Yes, COGS are deductible, but only if the hobby generates income.
Q: Do Uber and Lyft fees belong on Line 10?
A: Yes, commissions and fees withdrawn by ridesharing services from a driver’s payment are deducted on Line 10.
Q: What are “Other Expenses” on Schedule C?
A: Other expenses include items not deductible elsewhere on Schedule C, such as amortization, business startup costs and bad debts.
Q: Should royalties from writing a book be reported on Schedule C?
A: If the taxpayer is a self-employed writer, they report income and expenses on Schedule C. Otherwise, most royalty income is reported on Schedule E.
To learn more about preparing Schedule C for sole proprietors, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.