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 expenses.

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 business.

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.

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