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How to Report Income from a Side Job (Self-employed) on Your Taxes?

How to Fill Out Schedule C for Sole Proprietors in 2025


If you’re a self-employed individual or a sole proprietor, you'll need to file Schedule C (Form 1040) as part of your individual tax return to report your business income and expenses. Schedule C helps you determine the net profit or net loss from your business, which is then transferred to your main tax return (Form 1040). Here’s a step-by-step guide on how to fill it out.

1. Part I: Income

In this section, you’ll report your total business income.

  • Line 1: Enter your gross receipts or sales. This is the total income you received from your business, including cash, checks, and credit card payments.
  • Line 2: Report any returns and allowances (if applicable). This refers to refunds or discounts you gave to customers.
  • Line 7: This is your gross income, which is the total sales minus any returns and allowances.

2. Part II: Expenses

Next, you’ll list your business expenses. These are the costs that were necessary to run your business.

  • Line 8: Advertising – Include any costs associated with promoting your business.
  • Line 9: Car and truck expenses – You can claim deductions for business-related vehicle usage. If you use the standard mileage rate, you’ll need to track your business miles.
  • Line 17: Depreciation – This includes expenses for depreciating property, such as computers or equipment used in your business.
  • Line 18: Legal and professional services – Costs related to hiring an accountant, lawyer, or other professionals.

Be sure to list all the applicable expenses associated with your business operations, including office supplies, insurance, rent, utilities, and salaries or wages paid to employees (if applicable).

3. Part III: Cost of Goods Sold (COGS)

If your business involves manufacturing or selling physical products, you’ll need to calculate and report your cost of goods sold (COGS).

  • Line 33: Report the inventory at the beginning and end of the year, as well as any purchases or materials used in your products.

4. Part IV: Information on Your Vehicle

If you are claiming car expenses, you’ll need to fill out Part IV, where you’ll provide details about your vehicle usage, including the number of miles driven for business.

5. Part V: Other Expenses

If you have additional business expenses not included in the standard categories, you can list them in Part V. This might include things like business meals, travel, and education related to your profession.

6. Net Profit or Loss

After deducting your total expenses from your gross income, you’ll determine your net profit or loss. If you have a net profit, it will be added to your total taxable income on Form 1040. If you have a net loss, it may offset income from other sources.

Tips for Filing Schedule C:

  • Keep detailed records of all your income and expenses throughout the year.
  • Use accounting software to track your finances and make filling out Schedule C easier.
  • Consider deductions like the home office deduction if you run your business from home.

Conclusion

Filling out Schedule C is a key part of your self-employment taxes. By carefully reporting your income and expenses, you can accurately calculate your taxable income. If you're unsure about any part of the form, it might be helpful to consult with a tax professional to ensure everything is reported correctly.

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