Income—Business

Time Requirement: 20 minutes

Purpose

This lesson is designed to teach tax preparers how to report business income, including self-employment income, for taxpayers who are eligible to file Schedule C with limits.

Form 1040 is used to report income from a business or profession operated as a sole proprietor or independent contractor.

Objectives

Determine:

• How to report business income
• What business expenses are within the scope of the VITA/TCE program
• How to complete Schedule C
• How to identify "red flags" when preparing a Schedule C tax return with EIC
• What records to maintain

Teaching the Lesson

Refer to the Lesson Plan for helpful instructor notes, visual aids, TaxSlayer® demos, and Internet links. Prompt students to share what they know about business income.

Refer students who may want to work independently to Publication 4491, Business Income.

Key References

This lesson will refer to the following publications and forms:

• Form 13614-C
• Publication 4012, Income tab

All references to materials can be found by clicking Job Aids and Media buttons. There are also links to helpful tool that can be found on the irs.gov public portal. For this lesson, the student can link to the following sites for additional help:

• Small Business and Self-Employed Tax Center
• FAQs - Form 1099-MISC & Independent Contractors
• Tax Trails - Sole Proprietorship
• Tax Trails - Independent Contracting

TaxSlayer® Demos and Tutorials

It is recommended to go to the Practice Lab and access the latest TaxSlayer tutorial for this lesson. The TaxSlayer tutorials can be found by going to the Practice Lab and clicking on the link for TaxSlayer IRS training.

Publication 4012, Income tab, includes instructions on how to report business income and expenses on Schedule C.