Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Business; Form 1040, Line 12

Completing Schedule C

Completing Schedule C

Generally, the same business expenses are deductible on both Schedules C and C-EZ. The expenses are totaled and included on one line on Schedule C-EZ, whereas on Schedule C, the business expenses are broken down by category.

Be aware of the following General Information Section issues:

  • Enter the Principal Business Code. A list of Principal Business Codes can be found in Schedule C Instructions and in Form 1040 Instructions.
  • Check accounting method. (Only cash method is in scope for the VITA/TCE programs; if taxpayers use another method, refer them to a professional tax preparer.)
  • Check "Yes" or "No" box for: Did the taxpayer "materially participate" in the operation of the business?
    • In general, the taxpayer materially participates if based on all the facts and circumstances, the taxpayer participated in the activity on a regular, continuous, and substantial basis during the year. See Schedule C Instructions for specific tests to determine if the taxpayer meets the requirements for material participation.
    • If the taxpayer meets one of the tests for material participation, check the "Yes" box. If the taxpayer does not meet any of the tests, the answer is "No," or if there is uncertainty about the taxpayer materially participating in the business, refer the taxpayer to a professional tax preparer.
  • Check "Yes" or "No" box for: Did the business make any payments in the tax year that would require filing of Form(s) 1099?
  • If Yes, did or will the business file required Forms 1099? Check "Yes" or "No" box.

In general, taxpayers who seek assistance through the VITA/TCE programs may be required to file Form 1099-MISC for payments in the amount of $600 or more for services performed for a trade or business by people not treated as its employees. An example is for subcontractors who are nonemployees. For a complete listing of Forms 1099 and the requirements for issuance, refer to the chart on page 16 of the General Form 1099 Instructions.

If the taxpayer responds Yes to making payments that would require the filing of Form(s) 1099, the income tax return and any related Form 1099 preparation are both out of scope for the VITA/TCE programs. The Form 1040 must still be referred to a professional tax preparer even if the taxpayer indicates they have already filed the Forms 1099.

Schedule C, Lines A through J.
Schedule C

Schedule C