If you’re going to build a tax practice, you need to be comfortable with Schedule C. It’s one of the most common forms you’ll handle and one of the most profitable return types for your business.
What It Is
Schedule C is where sole proprietors and single-member LLC owners report their business income and expenses. It’s an attachment to the individual 1040. Your client might be a freelance designer, a rideshare driver, a consultant, a landscaper, or someone selling products online.
Income
Capture all business income, not just what appears on a 1099. Many clients believe “no 1099 means no tax.” That’s wrong. If a client received $5,000 in cash payments with no 1099 issued, that income still goes on the return. Explain this clearly during intake.
Common Deductions
Supplies, advertising, software subscriptions, vehicle expenses, home office, professional services, insurance, contract labor, and business travel. Your job is to ask the right questions so you capture everything the client is entitled to deduct. Many clients leave money on the table because they don’t know what qualifies.
Vehicle Expenses
The client chooses between the standard mileage rate or actual expenses. They need a mileage log to support the deduction. If they don’t have one, coach them on setting up a tracking app for next year.
Home Office
The simplified method allows $5 per square foot up to 300 square feet ($1,500 maximum). The regular method requires calculating the actual percentage of the home used exclusively for business. The simplified method is easier. The regular method sometimes produces a larger deduction. Run both.
Self-Employment Tax
The net profit from Schedule C flows to Schedule SE. Self-employment tax is 15.3% on net earnings up to the Social Security wage base and 2.9% above it. This is often the biggest surprise for self-employed clients, because they’re used to seeing only the employee half of payroll taxes as a W-2 worker.
Pricing
Schedule C returns take more time and carry more complexity than a basic W-2 return. Price accordingly: $300 to $500 is a reasonable range depending on your market.
For in-depth training on Schedule C and every other return type you’ll encounter, visit musespring.com.