Schedule C Recap

Schedule C Basics

100

This form is generally used to report income or loss from a business operated by a sole proprietor.

Schedule C

200

This is the main purpose of Schedule C.

Reporting profit or loss from a business

300

A taxpayer has $50,000 of business income and $30,000 of business expenses. What is the TP profit or loss?

$20,000 profit

400

Before you can troubleshoot a Schedule C error, you need to understand how...

calculate income and expenses to profit or loss

500

If you’re trying to understand why a computer-generated Schedule C total doesn’t agree with Line 31, this is the basic calculation you should review first.

The amounts leading to Lines 7 and 28.

Income-Expense= Profit/Loss

Income & Line 7

100

This Schedule C line represents gross income after the appropriate calculation from the income section.

Line 7

200

If Line 7 is $70,000 and Line 28 is $30,000, the taxpayer has this amount on Line 31.

$40,000 profit

300

If Line 7 is negative, you should pay particular attention to these fields when working certain Error Code 202 scenarios.

Fields 0901–0906

400

The amount on this line is important when determining whether the taxpayer has a profit or loss after expenses.

Line 7

Expenses

100

These are ordinary and necessary costs associated with operating a business.

business expenses

200

This line represents the total expenses entered in the Schedule C expense section.

Line 28

300

If a taxpayer has $40,000 of income and $25,000 of expenses, the expenses reduce the taxpayer’s business income by this amount.

$25,000

400

When troubleshooting Error Code 202, you may need to recompute the amounts leading to this line.

Line 28

500

If multiple Schedule C's were entered but the computer-generated total doesn’t agree with the taxpayer’s calculation, you should do this before deciding what correction is needed.

Recompute the Schedule Cs

COGS

100

COGS stands for this

Cost of Goods Sold

200

COGS generally relates to the cost of items that a business sells to customers.

Cost of Goods Sold

Profit/Loss

100

This is the final Schedule C line showing the taxpayer’s business profit or loss.

Line 31

200

If income is greater than expenses, the taxpayer generally has this.

A Profit

300

If expenses are greater than income, the taxpayer generally has this.

A Loss

400

If Schedule C Line 31 says $8,000 profit but the computer-generated total says $5,000, this is the error code

Error Code 202

500

Error Code 202 means this computer-generated field does not agree with Schedule C Line 31.

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