Schedule C - Helpful Information For New Businesses

If you are completing Federal Schedule C Profit or Loss From Business, you will enter the income and expenses which will then calculate the net profit (or loss) of the business. That net profit (or loss) amount then flows to Line 3 of IRS Schedule 1 (Form 1040). If there is a net profit, self-employment tax (Social Security tax and Medicare tax) will be calculated on Schedule SE and will appear on Schedule 2 (Form 1040) Line 4, and a deduction from this schedule will also be shown on Schedule 1 (Form 1040) Line 14, per the IRS instructions.

To enter or review information for your business on Schedule C Profit or Loss from Business:

  1. From within your TaxAct® return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand the category and then click Business income or loss from a sole proprietorship
  3. Click +Add Federal Schedule C to create a new copy of the form or Edit to review a form already created

Note. Depending on the amount of net income, there could also be federal taxes calculated which may necessitate quarterly tax payments be made to avoid an underpayment penalty at the end of the year. This could also apply to the state return. If you estimate there will be little (or no) net income in this first year, then estimated payments may not be necessary (especially if there is also Form W-2 tax withholding on the return which can offset any tax amount due from a business).

Following are the steps to calculate estimated taxes for next year (if necessary):

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
  2. Click 2020 Estimated Tax Payments in the Federal Quick Q&A Topics menu and then click Yes to review the requirements for making estimated tax payments for 2020 (and/or apply your 2019 refund towards your 2020 federal tax liability)
  3. If your return currently shows a federal refund amount, this screen will allow you to select to apply all or part of the refund to next year's tax liability or to not apply any of it to next year. Click Continue to select a method of calculating your estimated tax payments
  4. Select either Use worksheet calculation or Pay 110% of 2019 tax liability (this will be 100% if your adjusted gross income did not exceed the threshold)
  5. The program will proceed with the interview questions for you to enter the appropriate information. You must enter your estimated earnings in the 2020 column (using the current year's amounts for reference) in order to calculate the estimated amount to pay.

Note. The method of paying 100% (or 110%) of the current year's tax liability is only to avoid the interest penalty for underpaying your taxes in the following year. In the TaxAct program, this amount is calculated on IRS Form 2210, Line 4 Current year tax.

Use the worksheet method to estimate tax for the following year if you wish to cover all of the estimated tax that will be due on that return.

Additional Information

IRS Publication 334 Tax Guide for Small Business (For Individuals Who Use Schedule C)
IRS Publication 509 Tax Calendars
IRS Publication 583 Starting a Business and Keeping Records
IRS Publication 535 Business Expenses

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