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A: Yes, commissions and fees withdrawn by ridesharing services from a driver’s payment are deducted on Line 10.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.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
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. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.