Schedule C

Hot Topics

Need Some Deductions for 2011?

Don't overlook these!

10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Preparing Schedule C

<< Previous

Schedule C-Page 2, Part III: Cost of Goods Sold

This is where you figure cost of goods sold if you sell merchandise.

You need to take a physical inventory at year end to determine your cost of goods sold.

Cost of goods sold is entered on page 1, line 4.

Cost of goods sold is calculated as follows:

Beginning inventory, plus
Purchases for the year, equals
Goods available for sale, minus
Ending inventory (based on your physical count), equals
Cost of goods sold

Schedule C-Part IV: Information on Your Vehicle

This part of Schedule C asks for:

Business/investment miles driven during the year
Commuting mileage driven, and
Personal miles driven (excluding commuting mileage).

Complete Part IV only if:

You're claiming car or truck expenses on page 1, line 9 and
if you're not required to file Form 4562, Depreciation and Amortization (Form 4562 instructions) for this business.

You're not required to file Form 4562 if:

you already filed this form in a prior year and
have not placed any equipment in service in the current year.

Exception for listed property: You must file Form 4562 for listed property which was placed in service in a prior year.

Certain property used less than 100% for business is classified listed property. For example, if you use your computer and car for both personal and business purposes, these items are classified as listed property.

However, if such property was used 100% for business it is not classified as listed property

When Part IV does not have to be completed:

If you are required to complete Form 4562, it is not necessary to complete Part IV of Schedule C.

Form 4562, Part V, Section B asks for the same mileage information.

There are two methods for claiming car and truck expenses:

The actual expenses method, and
The mileage allowance method (if you use this method you don't have to figure depreciation).

Schedule C-Part V: Other Expenses

List expenses in this part that are not included on lines 8-26 or line 30 (expenses for business use of your home).