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Reporting Small Business Income, Self-Employment, and Side Hustles on Schedule C

Jo Willetts, EA

Director, Tax Resources

Published on: March 02, 2021

Self-employed or own a small business? Read on to see why you must file an IRS Schedule C to report on your income and expenses.

What is Schedule C?

Schedule C is the form used to report income and expenses from self-employment. This can encompass owning a digital or brick-and-mortar small business, freelancing, contracting, and gig work such as ride-share driving.

If you receive a Form 1099-MISC, 1099-NEC, and/or 1099-K, you are likely to have to report it on Schedule C along with other income that is not reported on another tax form. Such payments would include cash received for goods or services. It is important to substantiate both income and expenses when filing Schedule C, such as having bank or credit card statements to back up receipts and any other relevant records.

The net result of Schedule C is then carried to Schedule SE to determine your self-employment tax. One half of what you pay in self-employment tax  can be deducted regardless of whether you itemize deductions or not.

Do I need to have an established LLC or other business entity to file Schedule C?

While it may helpful to separate your business financial activity from your personal finances, you are not required to formalize your business as an LLC or other type of corporate entity. If you earn at least $400 from any source for the year you must file a tax return that includes Schedule C, even if this is your only income for the year. If your income for the year is $400 or more in self-employment income, you must still file a tax return with a Schedule C.  If you have other income and need to file a tax return, you must include all income $1 or more on a Schedule C.

Do I need to file more than one Schedule C?

If you have more than one trade or business where each activity is significantly different in nature, each one would require their own Schedule C. For example, if you are building a freelance writing career but driving for Uber as you grow your client base, these two activities would have their own Schedule C's.

If your spouse engages in the same line of work as you, they will need to file their own Schedule C if their income and deductions are separate from yours. If both of you operate an unincorporated business together, you may be eligible for qualified joint venture (QJV) treatment and you might be able to split your income and expenses into two Schedules C with your joint tax return.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

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