Schedule C is used for many things, including reporting income or loss from a sole-proprietor business. This is an increasingly popular form with the boom in gig economy jobs, and tax pros need to determine if their clients’ activities qualify as a business or a hobby.

Webinar instructor Amy Wall, EA, introduces Schedule C (Form 1040) and teaches when it needs to be filed and what information needs to be gathered from clients in a recent webinar.

Below, you’ll find a few of the top questions from the webinar and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.

Q: For a qualified joint venture (QJV), should each spouse get an employer identification number (EIN)?

A: No. Spouses electing QJV status are treated as sole proprietors for federal tax purposes. Using the rules for sole proprietors, an EIN is not required unless the sole proprietorship is required to file excise, employment, alcohol, tobacco or firearms returns. If an EIN is required, the filing spouse should request one as a sole proprietor.

Q: A client got a Form 1099-NEC, Nonemployee Compensation, for a one-time event that had no profit motive. How is this reported on the tax return?

A: It depends. If the activity was not conducted continuously and regularly to make a profit, presumably it’s a hobby and reported as other income. To avoid a notice from the IRS, report the income on Schedule C, back it out on Line 27a, Other expenses, and explain that the income is reported on Schedule 1 (Form 1040), Line 8i.

Q: Can a partnership be converted into a QJV after 10 years of existence? If they have a limited liability company (LLC), do they need to close it before making the QJV election?

A: Yes. If they meet all the QJV requirements, spouses can make the QJV election for a general partnership that has been in existence for 10 years. To qualify as a QJV, one requirement is that the business cannot be in the name of a state law entity (including a limited partnership or an LLC). In general, the couple needs to close the LLC to make the QJV election unless they live in a community property state (see Rev. Proc. 2002-69).

Q: Can royalty income be reported on Schedule C for the one year a taxpayer wrote a book, then on Schedule E for subsequent years when the taxpayer no longer writes but still receives royalties?

A: That’s possible, but it depends. Analyze the nine factors each year to determine if the taxpayer is regularly engaged in the trade or business of writing books. If an individual writes only one book as a sideline and never revises it, they would not be “regularly engaged” in an occupation or profession, and royalties therefrom would not be considered net earnings from self-employment (Rev. Rul. 55-385).

To learn more about Schedule C and how to complete it for a hobby or business, 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 join our completely free 30-day trial, visit natptax.com/explore.