Schedule C Tax Form
Schedule C Instructions
Quick disclaimer: Remember, I'm not a tax accountant. I worked in a tax office for a couple years, but that's been awhile. A lot has changed. Always double-check my comments by reading the instructions for yourself or by consulting your tax accountant.
Now, on to the expense section of your Schedule C:
- Line 8 - Advertising. This is for your business cards, pens with contact information, and other advertising. This was Category 3 in your Dome book.
- Line 9 - Car and Truck Expenses. The easiest way to figure this is to use the standard mileage deduction. It's a LOT easier than keeping track of tires, oil changes, and other maintenance. And it's usually a better deduction anyway. The standard mileage amount went up in the middle of the year, so you'll need to split your mileage into January through June, and July through December. For the first half of the year, the mileage rate was 51 cents per mile, so take the miles you drove during those months and multiply them by .51. Jot that number down somewhere. The second half of the year, that rate increased to 55.5 cents per mile. So take the miles you drove the second half of the year and multiply them by .555. Add that number to the other number and jot your new total down. If you had any tolls, go ahead and add them in here. Write the grand total on Line 9.
- Line 10 - Commissions and Fees. If you sold items for anyone else and paid them commissions that you didn't treat as inventory purchases, that will go here. This was Dome Category 31. eBay and Paypal fees also go here.
- Line 11 - Contract Labor. If you paid someone to help you with your business, that goes here. If you paid someone more than $600 over the year, you'll need to fill out a form 1099-MISC for them. (Be sure to see the instrutions if this applies to you)
- Line 12 - Depletion. I don't think this applies to any of us, but double check the instructions just in case.
- Line 13 - Depreciation and Section 179 expense deduction. This line is for printers, cameras, and other large purchases that have a useful life of more than one year. You have the option of either spreading the deduction out over several years or just deducting it all at once. I bought a thermal label printer this year (best investment EVER, by the way!), so I will put that on this line. I will just deduct it all at once as a Section 179 expense. If you do that, you'll need to fill out a Form 4562. I'll cover that form in detail next week. Line 13 doesn't have its own Dome category, but I made Dome category 35 my own custom Section 179 category. If you've made large purchases over the year, you should have a category in your Dome book for it somewhere.
- Line 14 - Employee benefit programs. I'm going to go out on a limb and assume that no one here has employees that they pay wages and benefits. If you do, read the instructions for this line.
- Line 15 - Insurance (other than health). If you have insurance on your business, then your premiums go here. This is NOT for shipping insurance.
- Line 16 - Interest (Mortgage and Other): From what I can tell in the instructions, this is not for interest paid on your home mortgage. This would be if you pay interest on property OTHER than your main home, and you use that property for your business.
- Line 17 - Legal and professional services. Tax prep and legal consulting fees would go here.
Let's look at the right side of the Expenses section now.
- Line 18 - Office Expense. This will be a combined total of any office supplies (pens, papers, ink, labels), shipping supplies (boxes, bubble wrap, packing peanuts, tape), and postage (shipping you paid, as well as shipping insurance and delivery confirmation). Those all come from Dome categories 5, 18, and 19.
- Line 19 - Pension and profit-sharing plans. This doesn't apply unless you contributed to pensions for employees. If you contributed to a pension on your own behalf as a self-employed person, that will go on your 1040, NOT on your Schedule C.
- Line 20 - Rent or lease. This is not for your property or home rent. This is for if you rented equipment for your business. A steam-cleaner for furniture, or something like that... Read the instructions to see what all qualifies.
- Line 21 - Repairs and maintenance. If you needed to have work done on your computer or printer, or on anything that you sold, that will go here. This is Dome category 21.
- Line 22 - Supplies. I'm having a hard time determining what goes in this category. I think most of our supplies went under Office Expense (like paper and tape). This category seems to be for more major supplies, but I can't think of anything offhand. Maybe a shelving system?
- Line 23 - Taxes and licenses. This will be any fees that you paid to acquire your sales tax license or any other licenses required by your location. Also include any sales tax that you paid to your state on behalf of your buyers. Dome categories 22 and 16.
- Line 24 - Travel, meals, and entertainment. You'll need to split this up. The first line will be for lodging. If it was an overnight business trip (a weekend thrifting road trip, for example), you may deduct lodging for yourself. Not for your spouse or your children, but you may deduct your own lodging. Be sure to read the instructions to make sure your lodging expense IS a qualified deduction. The second line is for meals and entertainment expenses occurred while away from home on business. If you're on a thrifting road trip and you grab a burger out, you can deduct that here. BUT ... and this is news to me ... you can only deduct 50% of the total. So if you ate a $4 burger, you can deduct $2 on this line.
- Line 25 - Utilities. Read the instructions on this one too. If you have a second line on your home phone that is specifically for your business (or a distinct ring tone), then you can deduct the business portion. If you just use your regular home phone line for a couple business calls, you can't deduct your phone service. If you have an itemized phone bill, I think you can probably deduct the cost of individual long-distance charges for those specific calls.
- Line 26 - Wages. If you have paid employees, be sure to read the instructions for this line. I'm skipping it because it doesn't apply to most of us.
- Line 27 - Other expenses. You will pull this number from another section that is further down on the schedule C. Don't worry about it just yet.
This really isn't as scary as people make it out to be. If you get overwhelmed, just take it one line at a time. Read all about that line in the instructions. And if you're still overwhelmed or confused, you need to call a tax accountant. But 90% of this is just common sense, easy enough if you stop to think about it and read.
We'll finish up in a day or so - if you've made it this far, I'm pretty sure you can handle the wrap up!