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. 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. For more information, see Publication 587, Business
Use of Your Home, Including Use by Day-Care Providers, or see 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 on
this, get Publication 533, Self-Employment Tax, or see Topic 554.
If you are new in business, you may want to order 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.
Also, see Topic 103 Small Business Tax Education Program
for additional information on beginning a new business. Publications and forms can be
ordered by calling 1-800-829-3676, or downloaded from this web site.
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