Schedule C Question... This Should Apply to A lot of People Here

by rbf738
14 replies
This is the first year I'm doing my own taxes so I'm learning about Schedule C which you need to fill out if you are American and make money through internet marketing (like many of us here). Technically a Schedule C is for home business owners but the IRS considers anyone who makes money through freelance work to be a business owner.

ANYWAYS, that's about the extent that I understand of it. In glancing at it (using Turbo Tax) I see that there are lots of questions about goods/costs of goods sold... None of these things apply to me, I make money through Clickbank...

So anyways again I figured plenty of you all would be doing your own taxes right now and likely have had experience with Schedule C, so if you could put this in internet marketer terms such as do I need to do anything beyond inputting my income... I'd appreciate it.

Thanks.
#apply #lot #people #question #schedule
  • Profile picture of the author Kat Bartone
    I've used TurboTax for years. The step by step interview is pretty good at helping you determine what your expenses/deductions are. Sometimes that costs/costs of goods sold stuff has to do with those who are carrying an inventory, and/or who have to collect state sales tax, etc.

    Even if you're making money through Clickbank, you may have expenses (hosting? domain? etc) that would be deducted against your earnings. So it's not so simple as just reporting your income, since there are expenses involved in running a business - and qualified expenses can be deducted from your income, thus reducing your net income.

    There's also the 'home office deduction' which can be a bit cumbersome.

    And these are just a few of the many considerations to be taken into account.

    Bottom line is that even though TurboTax (TT) has lots of context-help integrated into the program - if you're really not sure of something, your best bet is to consult with a tax professional. Once you get some professional guidance during this first year of using TT, it will be easier for you in future years.

    In any case, don't rely on getting the answers to your tax questions in this forum - unless we are ourselves tax professionals, we're not qualified to offer you guidance.

    - Kat
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    • Profile picture of the author Jill Carpenter
      No clue what a schedule C is.

      I let the accountant handle that.

      Here is what I give him:

      cell phone bills added up (that is my business phone)

      Hosting fees

      Domain fees

      Internet fees

      I am allowed deductions for my rent (based on the percentage of my home used as the business space)

      This also includes deductions for electric as that is needed for the biz.

      hard drives, paper, pens, etc - anything needed for me to do what I have to.

      Video tapes, cameras etc.

      I also have to pay a use tax though (this is a seperate bill), my business was registered locally so I pay tax on using my equipment.

      Have you registered your business?

      Gets too goofy for me, and best hand it over to the accountant.
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  • Profile picture of the author grayambition
    Originally Posted by rbf738 View Post

    ANYWAYS, that's about the extent that I understand of it. In glancing at it (using Turbo Tax) I see that there are lots of questions about goods/costs of goods sold... None of these things apply to me, I make money through Clickbank...
    Thanks.
    You might very well qualify for the Schedule C-EZ, which is a streamlined, less detailed version of the Schedule C. If you:

    * Have business expenses of $5,000 or less.
    * Use the cash method of accounting.
    * Do not have inventory at any time during the year.
    * Never hire an employee.
    * Do not depreciate any business property.
    * Do not claim expenses for business use of your home.
    * Do not carry over passive activity losses from an earlier tax year.

    *Above list is from Schedule C vs. C-EZ

    You can probably file a Schedule C-EZ. And even if you file a Schedule C, just enter 0 for goods/cost of goods sold (unless you actually do work with inventory).

    DISCLAIMER: I AM NOT AN ACCOUNTANT. I strongly urge you to seek the advice of an accountant, particularly if this will be your first time declaring self-employment income. Or at least get advice from a good forum where accountants/tax preparers hang out. misc.taxes.moderated is a good one.
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  • Profile picture of the author Chris W. Sutton
    Actually, a Schedule C is not for people who work at home... it is for sole proprietors and that can include brick and mortar business too.

    Basically, you show your income in the income section and you list your expenses in the expense section. You can show your income all under one account, i.e., Sales. You list your expenses by where you spent your money, i.e. office supplies, sub contractors, computer expense, professional fees, etc.

    If you have expensive equipment, you may have to depreciate it instead of taking the full deduction. There is also something called Section 179 depreciation that allows you to take the full deduction in the first year.

    I have oversimplified the whole process but there are a lot of laws regarding income and expenses and taxes. It would take a major product to even begin to explain how it all works.

    Avenuegirl is right in that it can get pretty "goofy" for most people! It can cost you more in the long run if you don't get it right the first time so you need to talk to someone who has experience in that field.

    Take care!
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    • Profile picture of the author Kat Bartone
      Actually, a Schedule C is not for people who work at home... it is for sole proprietors and that can include brick and mortar business too.
      Chris, I think you meant Schedule C is not ONLY for people who work at home. Yes, for sole proprietors of any sort - whether home office or brick and mortar.

      (BTW Chris - hi! Been awhile since we 'talked' - hope you're well!).

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      • Profile picture of the author Chris W. Sutton
        Hi Kat,

        It is good hearing from you again and, yes, I meant that Schedule C is not JUST for home workers. You have to read what I meant NOT what I wrote!

        Take care!
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        • Profile picture of the author ARVolund
          If you are using turbo tax go with the interview method (I think that is what it is called) It asks you questions and then it chooses the best forms for you and fills them out.

          If at the end of it all you have any reservations about how it came out you can print everything and pay someone to check over it. I have to say though that I used TT for years and can never remember it steering me wrong.

          One thing that will come up is the home office deduction. Do not do this unless you are 100% sure you qualify. There are quite a few stipulations to it and taking it greatly increases your chance of an audit so be real sure before taking it.

          Richard
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  • Profile picture of the author Popstar
    You need to consult an accountant.

    Among other things, you'll need to decide whether you're going to use the cash or accrual method of accounting for your business and how you'll categorize your expenses. What you decide this time will affect your future returns... and your chances of an audit.

    So do yourself a favor and get an accountant. It shouldn't cost much for a simple Schedule C.
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    • Profile picture of the author rbf738
      Thanks for all of the info so far everyone, I really appreciate it.

      Ultimately I may hire someone to do it for me, but figured if I started early enough myself I'd have plenty of time to ask questions in the TT forums every time something came up and maybe get through it myself.

      I feel as if I would benefit from and qualify for the Schedule C EZ way of doing it. The only expenses I could even think of deducting would be a combined $50 for hosting/domain registration for the past year. Trust me, I went over every other possible deduction and don't technically qualify for anything else, and I wouldn't even bother with deductions of that size and risk upping my chances for an audit.

      I think a lot of my problems have to do with TT itself as easy as it was up until the Schedule C business.
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  • Profile picture of the author Chris W. Sutton
    Did you use pay per click? Did you buy ebooks or reports that taught you how to market the products? Did you pay any PayPal, eBay, bank or other fees associated with your business? How about the Turbo Tax program? There are a lot of possible expenses you may be overlooking!

    Take care!
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  • Profile picture of the author Dennis Gaskill
    I'll tell you exactly what I do in step-by-step fashion:

    1) I put all my tax info into folders.
    2) I take those folders to my car.
    3) I drive to my accountants office.
    4) I leave them with my accountant.
    5) As if by magic, my taxes are done in a few days.

    There you go!
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    • Profile picture of the author pcpupil
      I do as Dennis.
      I have a Home Remodeling and Construction Co.
      Here are my steps:
      Add all income and total it up.
      Add all expenses,and total it up.
      Total any Ebay sales,online,ect...
      Total any ebay expenses,ect...
      Write down milage,difference from beginning of year to end of year.
      Take to my Tax lady.I think shes a CPA.Anyway,H&R would do.
      Mine charges me $85.00 for the service,by the way,this is tax deductable also.
      Plus i get a check back in 2 weeks.
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  • Profile picture of the author Pat Blank
    On a practical note, it really helps to have a separate bank account, credit card etc that you use for business and nothing else. Makes it easier to collect your business income, expenses etc. in order to fill in the forms, or for your accountant.
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    • Profile picture of the author kindsvater
      A couple quick tips:

      - Get a separate business checking account from your personal checking account. This makes your Schedule C so much easier.

      - Everything related to your online business should be expensed.

      - Your War Room admission fee should be a business expense.

      - As you receive affiliate checks during the year, and pay various expenses, make a copy and stick them in a folder or notebook. Preferably, segregated by 1040 line #. This makes everything much simpler. Eg, trying to find and remember those charitable deductions made during the year? - Just look in the folder you've been building during the year.
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