Since Schedule C is the primary method through which sole proprietors report their earnings, tax pros catering to clients who own small businesses must be adept in its preparation. It’s a cornerstone of tax compliance for this demographic, requiring attention to detail to accurately reflect the financial activities of the business.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Is it true you can still deduct the cost of goods sold (COGS) related to your hobby if you sell items?
A: Yes, COGS are deductible, but only if the hobby generates income.
Q: Do Uber and Lyft fees belong on Line 10?
A: Yes, commissions and fees withdrawn by ridesharing services from a driver’s payment are deducted on Line 10.
Q: What are “Other Expenses” on Schedule C?
A: Other expenses include items not deductible elsewhere on Schedule C, such as amortization, business startup costs and bad debts.
Q: Should royalties from writing a book be reported on Schedule C?
A: If the taxpayer is a self-employed writer, they report income and expenses on Schedule C. Otherwise, most royalty income is reported on Schedule E.
To learn more about preparing Schedule C for sole proprietors, 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 learn more, join our completely free 30-day trial at natptax.com/explore.
