What Forms Do I File?
If you are conducting a business (not a hobby; see the FAQ for
this under Individuals) as a sole proprietor, you will be filing
Schedule C, on which you list your income and deductible
Note that, even on the cash basis, your cash outflow may not
equal your deductible expenses. Certain items are not allowed
as business expenses (such as health/life/disability insurance
for the owner, penalties, fines, illegal payments, charity
contributions, etc.) while others may be limited (meals and
entertainment, business gifts, etc.) You need to become familiar
with the laws regarding the expenses you incur in your
If you buy business equipment or assets you will use in your business, you
cannot simply expense them on Schedule C. You need to capitalize the cost of
the acquisitions on Form 4562, and deduct depreciation in accordance with the
instructions. If you qualify, you may be able to write off up to $100,000 of
equipment acquisitions under Section 179, explained on the same form.
If your net income from self-employment will exceed $400, you also need to
complete and file Schedule SE for your self-employment tax.