Download 2020 Instructions for Schedule C and more Exams Business in PDF only on Docsity!
Department of the Treasury
Internal Revenue Service
2020 Instructions for Schedule C
Profit or Loss
From Business
Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activi- ty, not-for-profit activity, or a hobby does not qualify as a business. To report income from a nonbusiness activity, see the instructions for Schedule 1 (Form 1040), line 8. Also, use Schedule C to report (a) wages and expenses you had as a statutory em- ployee, (b) income and deductions of certain qualified joint ventures, and (c) certain amounts shown on a Form 1099, such as Form 1099-MISC, Form 1099-NEC, and Form 1099-K. See the instructions on your Form 1099 for more information about what to report on Schedule C. You may be subject to state and local taxes and other requirements such as business licenses and fees. Check with your state and local governments for more information.
Section references are to the Internal Revenue Code unless otherwise noted.
Future Developments
For the latest information about devel- opments related to Schedule C and its instructions, such as legislation enacted after they were published, go to IRS.gov/ ScheduleC.
What's New
Standard mileage rate. The business standard mileage rate for 2020 de- creased to 57.5 cents per mile.
Excess business loss limitation. The excess business loss limitation under section 461(l) has been retroactively re- pealed and will not apply for 2020.
The Families First Coronavirus Re- sponse Act (FFCRA). FFCRA pro- vides businesses with tax credits to cov- er certain costs of providing employees with required paid sick leave and expan- ded family and medical leave reasons re- lated to the coronavirus. Under the FFCRA, the amount of these credits is included in the recipient employers’ gross income. Report these amounts as “other income” on line 6. For more in- formation about these credits, including FAQs, visit IRS.gov/coronavirus/new- employer-tax-credits.
Reminders
Small Business and Self-Employed (SB/SE) Tax Center. Do you need help with a tax issue or preparing your return,
or do you need a free publication or form? SB/SE serves taxpayers who file Form 1040, Form 1040-SR, Schedules C, E, F, or Form 2106, as well as small business taxpayers with assets under $ million. For additional information, visit the Small Business and Self-Employed Tax Center at IRS.gov/SmallBiz. Gig Economy Tax Center. The gig (or on-demand, sharing, or access) economy refers to an activity where people earn income providing on-demand work, services, or goods. Visit IRS.gov/Gig to get more information about the tax con- sequences of participating in the gig economy.
General
Instructions
Other Schedules and Forms You May Have To File
• Schedule A (Form 1040) to deduct
interest, taxes, and casualty losses not related to your business.
• Schedule E (Form 1040) to report
rental real estate and royalty income or (loss) that is not subject to self-employment tax.
• Schedule F (Form 1040) to report
profit or (loss) from farming.
• Schedule J (Form 1040) to figure
your tax by averaging your farming or fishing income over the previous 3 years. Doing so may reduce your tax.
• Schedule SE (Form 1040) to pay
self-employment tax on income from any trade or business.
• Form 3800 to claim any of the
general business credits.
• Form 4562 to claim depreciation
(including the special allowance) on assets placed in service in 2020, to claim amortization that began in 2020, to make an election under section 179 to expense certain property, or to report information on listed property.
• Form 4684 to report a casualty or
theft gain or (loss) involving property used in your trade or business or income-producing property.
• Form 4797 to report sales,
exchanges, and involuntary conversions (not from a casualty or theft) of trade or business property.
• Form 6198 to apply a limitation to
your loss if you have a business loss and you have amounts invested in the business for which you are not at risk.
• Form 6252 to report income from
an installment agreement.
• Form 7202 to figure a refundable
credit for certain self-employed persons impacted by the coronavirus.
• Form 8582 to apply a limitation to
your loss from passive activities.
• Form 8594 to report certain
purchases or sales of groups of assets that constitute a trade or business.
• Form 8824 to report like-kind
exchanges.
• Form 8829 to claim actual
expenses for business use of your home.
C-
Jan 13, 2021 Cat. No. 24329W
- Form 8990 to determine whether your business interest deduction is limited.
- Form 8995 or 8995-A to claim a deduction for qualified business income.
Single-member limited liability com- pany (LLC). Generally, a single-mem- ber domestic LLC is not treated as a sep- arate entity for federal income tax purposes. If you are the sole member of a domestic LLC, file Schedule C (or Schedule E or F, if applicable) unless you have elected to treat the domestic LLC as a corporation. See Form 8832 for details on making this election and for information about the tax treatment of a foreign LLC.
Single-member limited liability com- panies (LLCs) with employees. A sin- gle-member LLC must file employment tax returns using the LLC's name and employer identification number (EIN) rather than the owner's name and EIN, even if the LLC is not treated as a sepa- rate entity for federal income tax purpo- ses.
Heavy highway vehicle use tax. If you use certain highway trucks, truck-trail- ers, tractor-trailers, or buses in your trade or business, you may have to pay a federal highway motor vehicle use tax. See the Instructions for Form 2290 to find out if you must pay this tax and vis- it IRS.gov/Trucker for the most recent developments.
Information returns. You may have to file information returns for wages paid to employees, certain payments of fees and other nonemployee compensation, interest, rents, royalties, real estate trans- actions, annuities, and pensions. See Line I , later, and the 2020 General In- structions for Certain Information Re- turns for details and other payments that may require you to file a Form 1099.
If you received cash of more than $10,000 in one or more related transac- tions in your trade or business, you may have to file Form 8300. For details, see Pub. 1544.
Business Owned and
Operated by Spouses
Generally, if you and your spouse joint- ly own and operate an unincorporated business and share in the profits and los- ses, you are partners in a partnership, whether or not you have a formal part-
nership agreement. You generally have to file Form 1065 instead of Schedule C for your joint business activity; howev- er, you may not have to file Form 1065 if either of the following applies.
- You and your spouse elect to be treated as a qualified joint venture. See Qualified Joint Venture next.
- You and your spouse wholly own the unincorporated business as commun- ity property and you treat the business as a sole proprietorship. See Community Income , later. Otherwise, use Form 1065. See Pub. 541 for information about partnerships.
Qualified Joint Venture You and your spouse can elect to treat an unincorporated business as a quali- fied joint venture instead of a partner- ship if you:
- Each materially participate in the business (see Material participation , lat- er, in the instructions for line G),
- Are the only owners of the busi- ness, and
- File a joint return for the tax year. Making the election will allow you to avoid the complexity of Form 1065, but still give each of you credit for social se- curity earnings on which retirement ben- efits, disability benefits, survivor bene- fits, and insurance (Medicare) benefits are based. In most cases, this election will not increase the total tax owed on the joint return. Jointly owned property. You and your spouse must operate a business to make this election. Do not make the election for jointly owned property that is not a trade or business. Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the elec- tion. Thus, a business owned and oper- ated by spouses through a limited liabil- ity company (LLC) does not qualify for the election of a qualified joint venture.
Making the election. To make this election, divide all items of income, gain, loss, deduction, and credit attribut- able to the business between you and your spouse based on your interests in the business. Each of you must file a separate Schedule C or F. Enter your share of the applicable income, deduc- tion, or (loss) on the appropriate lines of
CAUTION
!
your separate Schedule C or F. Each of you also may need to file a separate Schedule SE to pay self-employment tax. If the business was taxed as a part- nership before you made the election, the partnership will be treated as termi- nating at the end of the preceding tax year. For information on how to report the termination of the partnership, see Pub. 541. Revoking the election. The election can be revoked only with the permission of the IRS. However, the election re- mains in effect only for as long as you and your spouse continue to meet the re- quirements to make the election. If you and your spouse fail to meet the require- ments for any year, you will need to make a new election to be treated as a qualified joint venture in any future year. Employer identification number (EIN). You and your spouse do not need to obtain an EIN to make the elec- tion. But you may need an EIN to file other returns, such as employment or ex- cise tax returns. To apply for an EIN, see the Instructions for Form SS-4 or visit IRS.gov/EIN. Rental real estate business. If you and your spouse make the election for your rental real estate business, you must each report your share of income and deductions on Schedule E. Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and gen- erally is subject to the passive loss limi- tation rules. Electing qualified joint ven- ture status does not alter the application of the self-employment tax or the pas- sive loss limitation rules. More information. For more informa- tion on qualified joint ventures, go to IRS.gov/QJV.
Community Income If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. possession, you can treat your wholly owned, unincorporated business as a sole proprietorship, instead of a partner- ship. Any change in your reporting posi- tion will be treated as a conversion of the entity.
that extends beyond 12 months or the end of the next taxable year, it may not be deductible or may be deductible only in part for the year of the payment. See chapter 1 of Pub. 535.
For amounts includible in income and deductible as expense under an accrual method, see Pub. 538.
To change your accounting method, you generally must file Form 3115. You also may have to make an adjustment to prevent amounts of income or expense from being duplicated or omitted. This is called a section 481(a) adjustment.
Example. You change to the cash method of accounting and choose to ac- count for inventoriable items in the same manner as non-incidental materials and supplies for the 2020 tax year. You ac- crued sales in 2019 for which you re- ceived payment in 2020. You must re- port those sales in both years as a result of changing your accounting method and must make a section 481(a) adjust- ment to prevent duplication of income.
A net negative section 481 adjust- ment is generally taken into account in the year of change. A net positive sec- tion 481(a) adjustment is generally taken into account over a period of 4 years. In- clude any net positive section 481(a) ad- justments on line 6. If the net section 481(a) adjustment is negative, report it in Part V.
More information. For more informa- tion about changing your accounting method and the section 481(a) adjust- ment, see the Instructions for Form
- Additional information also is available in various revenue procedures. See Rev. Proc. 2015-13 (and any subse- quent revenue procedures modifying Rev. Proc. 2015-13) for the general pro- cedures to obtain the advance (non-auto- matic) consent or automatic consent of the Commissioner to change a method of accounting. Rev. Proc. 2015-13 is available at IRS.gov/irb/ 2015-5_IRB#RP-2015-13. See Rev. Proc. 2019-43 (and any subsequent reve- nue procedures modifying Rev. Proc. 2019-43) for a list of automatic changes, including a description of its effect on prior lists of automatic changes. Rev. Proc. 2019-43 is available at IRS.gov/irb/2019-48_IRB#RP-2019-.
Line G If your business activity was not a rental activity and you met any of the material participation tests, explained next, or the exception for oil and gas applies, check the “Yes” box. Otherwise, check the “No” box. If you check the “No” box, this activity is passive. If you have a loss from a passive activity, see Limit on los- ses , later. If you have a profit from the rental of property to a nonpassive activi- ty, see Recharacterization of Passive In- come in Pub. 925 to find out how to re- port the net income.
Material participation. For purposes of the seven material participation tests listed later, participation generally in- cludes any work you did in connection with an activity if you owned an interest in the activity at the time you did the work. The capacity in which you did the work does not matter. However, work is not treated as participation if it is work that an owner would not customarily do in the same type of activity and one of your main reasons for doing the work was to avoid the disallowance of losses or credits from the activity under the passive activity rules. Work you did as an investor in an ac- tivity is not treated as participation un- less you were directly involved in the day-to-day management or operations of the activity. Work done as an investor includes:
- Studying and reviewing financial statements or reports on the activity,
- Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and
- Monitoring the finances or opera- tions of the activity in a nonmanagerial capacity. Participation by your spouse during the tax year in an activity you own can be counted as your participation in the activity. This rule applies even if your spouse did not own an interest in the ac- tivity and whether or not you and your spouse file a joint return. However, this rule does not apply for purposes of de- termining whether you and your spouse can elect to have your business treated as a qualified joint venture instead of a partnership (see Qualified Joint Venture , earlier).
For purposes of the passive activity rules, you materially participated in the operation of this trade or business activi- ty during 2020 if you met any of the fol- lowing seven tests.
- You participated in the activity for more than 500 hours during the tax year.
- Your participation in the activity for the tax year was substantially all of the participation in the activity of all in- dividuals (including individuals who did not own any interest in the activity) for the tax year.
- You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other person for the tax year. This includes individuals who did not own any interest in the activity.
- The activity is a significant par- ticipation activity for the tax year, and you participated in all significant partici- pation activities for more than 500 hours during the year. An activity is a “signifi- cant participation activity” if it involves the conduct of a trade or business, you participated in the activity for more than 100 hours during the tax year, and you did not materially participate under any of the material participation tests (other than this test 4).
- You materially participated in the activity for any 5 of the prior 10 tax years.
- The activity is a personal service activity in which you materially partici- pated for any 3 prior tax years. A per- sonal service activity is an activity that involves performing personal services in the fields of health, law, engineering, ar- chitecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor.
- Based on all the facts and circum- stances, you participated in the activity on a regular, continuous, and substantial basis for more than 100 hours during the tax year.Your participation in managing the activity does not count in determin- ing if you meet this test if any person (except you) (a) received compensation for performing management services in connection with the activity, or (b) spent more hours during the tax year than you spent performing management services in connection with the activity (regard-
less of whether the person was compen- sated for the services).
Rental of personal property. General- ly, a rental activity (such as long-term equipment leasing) is a passive activity even if you materially participated in the activity. However, if you met any of the five exceptions listed under Rental Ac- tivities in the Instructions for Form 8582, the rental of the property is not treated as a rental activity and the mate- rial participation rules explained earlier apply.
Exception for oil and gas. If you are filing Schedule C to report income and deductions from an oil or gas well in which you own a working interest di- rectly or through an entity that does not limit your liability, check the “Yes” box. The activity of owning a working inter- est is not a passive activity, regardless of your participation.
Limit on losses. Your business activity loss may be limited if you checked the “No” box on line G. In addition, your rental activity loss may be limited even if you materially participated. In gener- al, a business activity in which you do not materially participate or a rental ac- tivity is a passive activity and you have to use Form 8582 to apply a limitation that may reduce the loss, if any, that you may enter on Schedule C, line 31. For details, see Pub. 925.
Line H
If you started or acquired this business in 2020, check the box on line H. Also, check the box if you are reopening or re- starting this business after temporarily closing it, and you did not file a 2019 Schedule C for this business.
Line I
If you made any payment in 2020 that would require you to file any Forms 1099, check the “Yes” box. Otherwise, check the “No” box.
You may have to file information re- turns for wages paid to employees, cer- tain payments of fees and other nonem- ployee compensation, interest, rents, royalties, real estate transactions, annui- ties, and pensions. You also may have to file an information return if you sold $5,000 or more of consumer products to
a person on a buy-sell, deposit-commis- sion, or other similar basis for resale.
The Guide to Information Re- turns in the 2020 General In- structions for Certain Informa- tion Returns identifies which Forms 1099 must be filed, the amounts to re- port, and the due dates for the required Forms 1099.
Part I. Income
Except as otherwise provided in the In- ternal Revenue Code, gross income in- cludes income from whatever source de- rived. In certain circumstances, howev- er, gross income does not include extra- territorial income that is qualifying for- eign trade income. Use Form 8873 to figure the extraterritorial income exclu- sion. Report it on Schedule C as ex- plained in the Instructions for Form
If you were a debtor in a chapter 11 bankruptcy case during 2020, see Chap- ter 11 Bankruptcy Cases in the Instruc- tions for Forms 1040 and 1040-SR (un- der Income ) and the Instructions for Schedule SE.
Be sure to report all income attributa- ble to your trade or business from all sources. You may receive one or more Forms 1099 from people who are re- quired to provide information to the IRS listing amounts that may be income you received as a result of your trade or busi- ness activities. The following is a list of some of the common Forms 1099.
- 1099-MISC. For more information about what is being reported on Form 1099-MISC, see the Instructions for Re- cipient included on that form.
- 1099-NEC. For more information about what is being reported on Form 1099-NEC, see the Instructions for Re- cipient included on that form.
- 1099-K.^ For^ more^ information about what is being reported on Form 1099-K, see the Instructions for Payee included on that form and visit IRS.gov/ Gig. Income you report on Sched- ule C may be qualified business income and entitle you to a de- duction on Form 1040 or 1040-SR, line 13.
TIP
TIP
Line 1 Enter gross receipts from your trade or business. Be sure to check any Forms 1099 you received for business income that must be reported on this line.
If you received one or more Forms 1099-NEC, be sure line 1 includes amounts properly shown on your Forms 1099-NEC. If the total amounts that were reported in box 1 of Forms 1099-NEC are more than the total you are reporting on line 1, attach a state- ment explaining the difference. Statutory employees. If you received a Form W-2 and the "Statutory employee" box in box 13 of that form was checked, report your income and expenses related to that income on Schedule C. Enter your statutory employee income from box 1 of Form W-2 on line 1 of Sched- ule C and check the box on that line. So- cial security and Medicare tax should have been withheld from your earnings; as a result, you do not owe self-employ- ment tax on these earnings. Statutory employees include full-time life insur- ance agents, certain agent or commis- sion drivers and traveling salespersons, and certain homeworkers. If you had both self-employment in- come and statutory employee income, you must file two Schedules C. You cannot combine these amounts on a sin- gle Schedule C.
Qualified joint ventures should report rental real estate income not subject to self-employment tax on Schedule E. See Qualified Joint Venture , earlier, and the Instructions for Schedule E.
Installment sales. Generally, the in- stallment method cannot be used to re- port income from the sale of (a) personal property regularly sold under the install- ment method, or (b) real property held for resale to customers. But the install- ment method can be used to report in- come from sales of certain residential lots and timeshares if you elect to pay interest on the tax due on that income af- ter the year of sale. See section 453(l)(2) (B) for details. If you make this election, include the interest in the total on Schedule 2 (Form 1040), line 8. Check box c and enter the amount of interest
CAUTION
!
However, if you are a dealer in property, enter on line 10 the commissions and fees you paid to facilitate the sale of that property.
Note. A dealer in property is a person who regularly sells property in the ordi- nary course of their trade or business.
For more information on the capitali- zation of commissions and fees, see the examples under Regulations section 1.263(a)-1(e).
Line 11
Enter the total cost of contract labor for the tax year. Contract labor includes payments to persons you do not treat as employees (for example, independent contractors) for services performed for your trade or business. Do not include contract labor deducted elsewhere on your return, such as contract labor in- cludible on line 17, 21, 26, or 37. Also, do not include salaries and wages paid to your employees; instead, see Line 26 , later.
You must file Form 1099-NEC to re- port contract labor payments of $600 or more during the year. See the Instruc- tions for Forms 1099-MISC and 1099-NEC for details.
Line 12
Enter your deduction for depletion on this line. If you have timber depletion, attach Form T (Timber). See chapter 9 of Pub. 535 for details.
Line 13
Depreciation and section 179 expense deduction. Depreciation is the annual deduction allowed to recover the cost or other basis of business or investment property having a useful life substantial- ly beyond the tax year. You also can de- preciate improvements made to leased business property. However, stock in trade, inventories, and land are not de- preciable. Depreciation starts when you first use the property in your business or for the production of income. It ends when you take the property out of serv- ice, deduct all your depreciable cost or other basis, or no longer use the property in your business or for the production of income. You also can elect under sec- tion 179 to expense part or all of the cost of certain property you bought in 2020
for use in your business. See the Instruc- tions for Form 4562 and Pub. 946 to fig- ure the amount to enter on line 13. When to attach Form 4562. You must complete and attach Form 4562 only if you are claiming:
- Depreciation on property placed in service during 2020;
- Depreciation^ on^ listed^ property (defined later), regardless of the date it was placed in service; or
- A section 179 expense deduction. If you acquired depreciable property for the first time in 2020, see Pub. 946. Listed property. Listed property gener- ally includes but is not limited to:
- Passenger^ automobiles^ weighing 6,000 pounds or less;
- Any other property used for trans- portation if the nature of the property lends itself to personal use, such as mo- torcycles, pickup trucks, etc.; and
- Any property used for entertain- ment or recreational purposes (such as photographic, phonographic, communi- cation, and video recording equipment).
Exception. Listed property does not include photographic, phonographic, communication, or video equipment used exclusively in your trade or busi- ness or at your regular business estab- lishment. For purposes of this exception, a portion of your home is treated as a regular business establishment only if that portion meets the requirements un- der section 280A(c)(1) for deducting ex- penses for the business use of your home.
Recapture. See Line 6 , earlier, if the business use percentage of any listed property dropped to 50% or less in 2020.
Line 14 Deduct contributions to employee bene- fit programs that are not an incidental part of a pension or profit-sharing plan included on line 19. Examples are acci- dent and health plans, group-term life insurance, and dependent care assistance programs. If you made contributions on your behalf as a self-employed person to a dependent care assistance program, complete Form 2441, Parts I and III, to figure your deductible contributions to that program.
You cannot deduct contributions you made on your behalf as a self-employed person for group-term life insurance.
Do not include on line 14 any contri- butions you made on your behalf as a self-employed person to an accident and health plan. However, you may be able to deduct on Schedule 1 (Form 1040), line 16, the amount you paid for health insurance on behalf of yourself, your spouse, and dependents, even if you do not itemize your deductions. See the in- structions for Schedule 1 (Form 1040), line 16, for details.
You must reduce your line 14 deduc- tion by the amount of any credit for small employer health insurance premi- ums determined on Form 8941. See Form 8941 and its instructions to deter- mine which expenses are eligible for the credit.
Line 15 Deduct premiums paid for business in- surance on line 15. Deduct on line 14 amounts paid for employee accident and health insurance. Do not deduct amounts credited to a reserve for self-insurance or premiums paid for a policy that pays for your lost earnings due to sickness or disability. For details, see chapter 6 of Pub. 535.
Lines 16a and 16b
Interest allocation rules. The tax treat- ment of interest expense differs depend- ing on its type. For example, home mortgage interest and investment inter- est are treated differently. “Interest allo- cation” rules require you to allocate (classify) your interest expense so it is deducted (or capitalized) on the correct line of your return and receives the right tax treatment. These rules could affect how much interest you are allowed to deduct on Schedule C. Generally, you allocate interest ex- pense by tracing how the proceeds of the loan were used. See chapter 4 of Pub. 535 for details. Limitation on business interest. You must file Form 8990 to deduct any inter- est expenses of this trade or business un- less you are a small business taxpayer (defined later in Part III) or meet one of the other filing exceptions listed in the Instructions for Form 8990.
If you must file Form 8990, figure the limit on your business interest ex- penses on Form 8990 before completing lines 16a and 16b. Follow the instruc- tions in How to report , later, but report the reduced interest on lines 16a and 16b. The interest you can't deduct this year will carry forward to next year on Form 8990.
If you are a small business taxpayer or meet one of the other filing excep- tions for Form 8990, follow the instruc- tions in How to report , later, and report all of your deductible interest on lines 16a and 16b.
How to report. If you have a mortgage on real property used in your business, enter on line 16a the interest you paid for 2020 to banks or other financial in- stitutions for which you received a Form 1098 (or similar statement). If you did not receive a Form 1098, enter the inter- est on line 16b.
If you paid more mortgage interest than is shown on Form 1098, see chap- ter 4 of Pub. 535 to find out if you can deduct the additional interest. If you can, include the amount on line 16a. Attach a statement to your return explaining the difference and enter “See attached” in the margin next to line 16a.
If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage and the other person re- ceived the Form 1098, include your share of the interest on line 16b. Attach a statement to your return showing the name and address of the person who re- ceived the Form 1098. In the margin next to line 16b, enter “See attached.”
If you paid interest in 2020 that also applies to future years, deduct only the part that applies to 2020.
Line 17
Include on this line fees charged by ac- countants and attorneys that are ordinary and necessary expenses directly related to operating your business.
Include fees for tax advice related to your business and for preparation of the tax forms related to your business. Also, include expenses incurred in resolving asserted tax deficiencies related to your business.
For more information, see Pub. 334 or 535.
Line 18 Include on this line your expenses for office supplies and postage.
Line 19 Enter your deduction for the contribu- tions you made for the benefit of your employees to a pension, profit-sharing, or annuity plan (including SEP, SIM- PLE, and SARSEP plans described in Pub. 560). If the plan included you as a self-employed person, enter the contri- butions made as an employer on your behalf on Schedule 1 (Form 1040), line 15, not on Schedule C.
This deduction may be subject to lim- itations. For more information on poten- tial limitations, see Pub. 560.
In most cases, you must file the ap- plicable form listed below if you main- tain a pension, profit-sharing, or other funded-deferred compensation plan. The filing requirement is not affected by whether or not the plan qualified under the Internal Revenue Code, or whether or not you claim a deduction for the cur- rent tax year. There is a penalty for fail- ure to timely file these forms. Form 5500-EZ. File this form if you have a one-participant retirement plan that meets certain requirements. A one-participant plan is a plan that covers only you (or you and your spouse). Form 5500-SF. File this form electron- ically with the Department of Labor (at www.efast.dol.gov ) if you have a small plan (fewer than 100 participants in most cases) that meets certain require- ments. Form 5500. File this form electronical- ly with the Department of Labor (at www.efast.dol.gov ) for a plan that does not meet the requirements for filing Form 5500-EZ or Form 5500-SF.
For details, see Pub. 560.
Lines 20a and 20b If you rented or leased vehicles, machi- nery, or equipment, enter on line 20a the business portion of your rental cost. But if you leased a vehicle for a term of 30 days or more, you may have to reduce your deduction by an amount called the
inclusion amount. See Leasing a Car in chapter 4 of Pub. 463 to figure this amount.
Enter on line 20b amounts paid to rent or lease other property, such as of- fice space in a building.
Line 21 Deduct the cost of incidental repairs and maintenance that do not add to the prop- erty's value or appreciably prolong its life. Do not deduct the value of your own labor. Do not deduct amounts spent to restore or replace property; they must be capitalized.
Line 22 In most cases, you can deduct the cost of materials and supplies only to the extent you actually consumed and used them in your business during the tax year (unless you deducted them in a prior tax year). However, if you had incidental materials and supplies on hand for which you kept no inventories or records of use, you can deduct the cost of those you actually purchased during the tax year, provided that method clearly reflects income.
You also can deduct the cost of books, professional instruments, equip- ment, etc., if you normally use them within a year. However, if their useful- ness extends substantially beyond a year, you must generally recover their costs through depreciation.
Line 23 You can deduct the following taxes and licenses on this line.
- State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you also must include the amount col- lected in gross receipts or sales on line 1.
- Real estate and personal property taxes on business assets.
- Licenses and regulatory fees for your trade or business paid each year to state or local governments. But some li- censes, such as liquor licenses, may have to be amortized. See chapter 8 of Pub. 535 for details.
- Social security and Medicare taxes paid to match required withholding from your employees’ wages. Reduce your
General Services Administration's web- site at www.gsa.gov.
See chapter 1 of Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel.
Amount of deduction. In most cases, you can deduct only 50% of your busi- ness meal expenses, including meals in- curred while away from home on busi- ness. However, for individuals subject to the Department of Transportation (DOT) hours of service limits, that percentage is increased to 80% for business meals consumed during, or incident to, any pe- riod of duty for which those limits are in effect. Individuals subject to the DOT hours of service limits include the fol- lowing.
- Certain air transportation workers (such as pilots, crew, dispatchers, me- chanics, and control tower operators) who are under Federal Aviation Admin- istration regulations.
- Interstate truck operators who are under DOT regulations.
- Certain merchant mariners who are under Coast Guard regulations.
However, you can fully deduct meals and incidentals furnished or reimbursed to an employee if you properly treat the expense as wages subject to withhold- ing. You also can fully deduct meals and incidentals provided to a nonemployee to the extent the expenses are includible in the gross income of that person and reported on Form 1099-NEC. See Pub. 535 for details and other exceptions.
Daycare providers. If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to figure the deductible cost of meals and snacks provided to eligible children. See Pub. 587 for details, in- cluding recordkeeping requirements.
Line 25
Deduct utility expenses only for your trade or business.
Local telephone service. If you used your home phone for business, do not deduct the base rate (including taxes) of the first phone line into your residence. But you can deduct any additional costs you incurred for business that are more than the base rate of the first phone line. For example, if you had a second line, you can deduct the business percentage
of the charges for that line, including the base rate charges.
Line 26 Enter the total salaries and wages for the tax year reduced by the amount of the following credit(s), if applicable.
- Work^ Opportunity^ Credit^ (Form 5884).
- Employee Retention Credit (Form 5884-A).
- Empowerment Zone Employment Credit (Form 8844).
- Indian Employment Credit (Form 8845).
- Credit^ for^ Employer^ Differential Wage Payments (Form 8932).
- Employer Credit for Paid Family and Medical Leave (Form 8994).
Also reduce your deduction by the nonrefundable and refunda- ble portions of the new CARES Act employee retention credit claimed on Form 944 or Form(s) 941 for your business employee.
Do not reduce your deduction for any portion of a credit that was passed through to you from a pass-through enti- ty. See the instructions for the credit form for more information.
Do not include salaries and wages de- ducted elsewhere on your return or amounts paid to yourself.
If you provided taxable fringe benefits to your employees, such as personal use of a car, do not deduct as wages the amount ap- plicable to depreciation and other ex- penses claimed elsewhere.
In most cases, you are required to file Form W-2, Wage and Tax Statement, for each employee. See the General In- structions for Forms W-2 and W-3.
Line 30
Business use of your home. You may be able to deduct certain expenses for business use of your home, subject to limitations. To claim a deduction for business use of your home, you can use Form 8829 or you can elect to determine the amount of the deduction using a sim- plified method. For additional information about claiming this deduction, see Pub. 587.
CAUTION
!
CAUTION
!
If you are not using the simpli- fied method to determine the amount of expenses you may deduct for business use of a home, do not complete the additional entry spaces on line 30 for total square footage of your home and of the part of the home used for business. Just include the amount from line 36 of your Form 8829 on line 30.
Simplified method. The simplified method is an alternative to the calcula- tion, allocation, and substantiation of ac- tual expenses. In most cases, you will figure your deduction by multiplying the area (measured in square feet) used reg- ularly and exclusively for business, reg- ularly for daycare, or regularly for stor- age of inventory or product samples, by $5. The area you use to figure your de- duction cannot exceed 300 square feet. You cannot use the simplified method to figure a deduction for rental use of your home.
Electing to use the simplified meth- od. You choose whether or not to use the simplified method each tax year. Make the election by using the simpli- fied method to figure the deduction for the qualified business use of a home on a timely filed, original federal income tax return for that year. An election for a year, once made, is irrevocable. A change from using the simplified meth- od in one year to actual expenses in a succeeding year, or vice versa, is not a change in method of accounting and does not require the consent of the Com- missioner. If you share your home with someone else who uses the home for a separate business that qualifies for this deduction, each of you may make your own elec- tion, but not for the same portion of the home. If you conduct more than one busi- ness that qualifies for this deduction in your home, your election to use the sim- plified method applies to all your quali- fied business uses of your home. You are limited to a maximum of 300 square feet for all of the businesses you conduct in your home that qualify for this deduc- tion. Allocate the actual square footage used (up to the maximum 300 square feet) among your qualified business uses in any reasonable manner you choose, but you may not allocate more square
TIP
feet to a qualified business use than you actually use in that business.
If you used your home for more than one business, you will need to file a separate Sched- ule C for each business. Do not combine your deductions for each business use on a single Schedule C.
Business use of more than one home. You may have used more than one home in your business. If you used more than one home for the same busi- ness during 2020, you may elect to use the simplified method for only one home; you must file a Form 8829 to claim a business use of the home deduc- tion for any additional home. If one or more of the homes was not used for the entire year (for example, you moved during the year), see Part-year use or area changes (for simplified method on- ly) , later, and Columns (a) and (b) in the Instructions for Form 8829.
Other requirements must still be met. You must still meet all the use re- quirements to claim a deduction for business use of the home. The simplified method is only an alternative to the cal- culation, allocation, and substantiation of actual expenses. The simplified meth- od is not an alternative to the exclusivity and other tests that must be met in order to qualify for this deduction. For more information about qualifying business uses, see Qualifying for a Deduction in Pub. 587.
Gross income limitation. The amount of your deduction is still limited to the gross income derived from quali- fied business use of the home reduced by the business deductions that are not related to your use of the home. If this limitation reduces the amount of your deduction, you cannot carryover the dif- ference to another tax year.
Carryover of actual expenses from Form 8829. If you used Form 8829 in a prior year, and you had actual expenses that you could carryover to the next year, you cannot claim those expenses if you are using the simplified method. In- stead, the actual expenses from Form 8829 that were not allowed will be car- ried over to the next year that you use actual expenses to figure your deduc- tion.
CAUTION
!
Depreciation of home. You cannot deduct any depreciation (including any additional first-year depreciation) or sec- tion 179 expense for the portion of your home that is used in a qualified business use if you figure the deduction for the business use of your home using the simplified method. The depreciation de- duction allowable for that portion of the home for that year is deemed to be zero.
Although you cannot deduct any depreciation or section 179 expense for the portion of your home that is a qualified business use be- cause you elect to use the simplified method, you may still claim depreciation or the section 179 expense deduction on other assets (for example, furniture and equipment) used in the qualified busi- ness use of your home.
Figuring your allowable expenses for business use of the home. You will figure the deduction using Form 8829 or the simplified method worksheet, or both. You may not use the simplified method and also file Form 8829 for the same qualified business use of the same home.
Using Form 8829. Use Form 8829 to figure and claim this deduction for a home if you are not or cannot use the simplified method for that home. For in- formation about claiming this deduction using Form 8829, see the Instructions for Form 8829 and Pub. 587.
Using the simplified method. Use the Simplified Method Worksheet in these instructions to figure your deduc- tion for a qualified business use of your home if you are electing to use the sim- plified method for that home.
Shared use (for simplified method only). If you share your home with someone else who uses the home for a separate business that also qualifies for this deduction, you may not include the same square feet to figure your deduc- tion as the other person. You must allo- cate the shared space between you and the other person in a reasonable manner.
Example. Kristen and Lindsey are roommates. Kristen uses 300 square feet of their home for a qualified business use. Lindsey uses 200 square feet of their home for a separate qualified busi-
TIP
CAUTION
!
ness use. The qualified business uses share 100 square feet. In addition to the portion that they do not share, Kristen and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. If divided evenly, Kristen could claim 250 square feet using the simpli- fied method and Lindsey could claim 150 square feet.
Part-year use or area changes (for simplified method only). If your quali- fied business use was for a portion of the tax year (for example, a seasonal busi- ness, a business that begins during the year, or you moved during the year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowa- ble square footage. You figure the aver- age monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Addi- tionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month.
Example 1. Andy files his federal in- come tax return on a calendar year basis. On July 20, he began using 400 square feet of his home for a qualified business use. He continued to use the 400 square feet until the end of the year. Andy's average monthly allowable square foot- age is 125 square feet (300 square feet for August through December divided by the number of months in the year ((
- 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12)).
Example 2. Roland files his federal income tax return on a calendar year ba- sis. On April 20, he began using 100 square feet of his home for a qualified business use. On August 5, he expanded the area of his qualified business use to 350 square feet. Roland continued to use the 350 square feet until the end of the year. Roland's average monthly allowa- ble square footage is 150 square feet (100 square feet for May through July and 300 square feet for August through December divided by the number of months in the year ((0 + 0 + 0 + 0 + 100
Example 3. Donna files her federal income tax return on a calendar year ba- sis. From January 1 through July 16 she used 300 square feet of her home for a qualified business use. On July 17, Don- na moved to a new home and immedi- ately began using 200 square feet of the new home for the same qualified busi- ness use. While preparing her tax return, Donna used the simplified method to de- duct expenses for the qualified business use of her old home. Donna's average monthly allowable square footage is 175 square feet (300 square feet for January through July divided by the number of months in the year ((300 + 300 + 300 + 300 + 300 + 300 + 300 + 0 + 0 + 0 + 0 + 0)/12)). Donna also prepared Form 8829 to deduct the actual expenses associated with the qualified business use of her new home.
Once you have determined your al- lowable square footage, enter the result on line 2 of the Simplified Method Worksheet.
If you moved during the year, your average allowable square footage will generally be less than 300.
CAUTION
!
You can use the Area Adjust- ment Worksheet in Pub. 587 to help you determine the allowa- ble square footage to enter on line 2 of the Simplified Method Worksheet.
Reporting your expenses for business use of the home. If you did not use the simplified method, include the amount from line 36 of Form 8829 on line 30 of the Schedule C you are filing for that business.
If you used the simplified method. If you elect to use the simplified method for the business use of a home, complete the additional entry spaces on line 30 for that home only. Include the amount from line 5 of the Simplified Method Worksheet on line 30. If you itemize your deductions on Schedule A, you may deduct your mort- gage interest, real estate taxes, and casu- alty losses on Schedule A as if you did not use your home for business. You cannot deduct any excess mortgage in- terest, excess real estate taxes, or excess casualty losses on Schedule C for this home. Use Part II of Schedule C to deduct business expenses that are unrelated to the qualified business use of the home (for example, expenses for advertising, wages, or supplies, or depreciation of equipment or furniture).
TIP
Deduction figured on multiple forms. If you used more than one home for a business during the year, you may use a Form 8829 for each home or you may use the simplified method for one home and Form 8829 for any other home. Combine the amount you figured using the simplified method and the amounts you figured on your Forms 8829, and then enter the total on line 30 of the Schedule C you are filing for that business.
Line 31
Figuring your net profit or loss. If your expenses (including the expenses you report on line 30) are more than your gross income, do not enter your loss on line 31 until you have applied the at-risk rules and the passive activity loss rules. To apply these rules, follow the instructions in Line 32 and the In- structions for Form 8582. After applying those rules, the amount on line 31 will be your loss, and it may be smaller than the amount you figured by subtracting line 30 from line 29. If your gross income is more than your expenses (including the expenses you report on line 30), and you do not have prior year unallowed passive activ- ity losses, subtract line 30 from line 29. The result is your net profit.
Daycare Facility Worksheet (for simplified method) Keep for Your Records
- Multiply days used for daycare during the year by hours used per day................................... 1.
- Total hours available for use during the year. See the Instructions for the Daycare Facility Worksheet............... 2.
- Divide line 1 by line 2. Enter the result as a decimal amount here and on line 3b of the Simplified Method Worksheet......................................................................... 3.
Instructions for the Daycare Facility Worksheet
Use this worksheet to figure the percentage to use on line 3b of the Simplified Method Worksheet. If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate before figuring your deduction using the simplified method.
TIP^ If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to complete this worksheet. This worksheet is only needed if you did not use the allowable area exclusively for daycare.
Line 1. Enter the total number of hours the facility was used for daycare during the year.
Example. Your home is used Monday through Friday for 12 hours per day for 250 days during the year. It also is used on 50 Saturdays for 8 hours a day. Enter 3,400 hours on line 4 (3,000 hours for weekdays plus 400 hours for Saturdays).
Line 2. If you used your home for daycare during the entire year, multiply 365 days (366 for a leap year) by 24 hours, and enter the result. If you started or stopped using your home for daycare during the year, you must prorate the number of hours based on the number of days the home was available for daycare. Multiply 24 hours by the number of days available and enter that result.
If your gross income is more than your expenses (including the expenses you report on line 30), and you have pri- or year unallowed passive activity los- ses, do not enter your net profit on line 31 until you have figured the amount of prior year unallowed passive activity losses you may claim this year for this activity. Use Form 8582 to fig- ure the amount of prior year unallowed passive activity losses you may include on line 31. Be sure to indicate that you are including prior year passive activity losses by entering "PAL" to the left of the entry space.
If you checked the "No" box on line G, see the Instructions for Form 8582; you may need to include information from this schedule on that form, even if you have a net profit.
Rental real estate activity. Unless you are a qualifying real estate profes- sional, a rental real estate activity is a passive activity, even if you materially participated in the activity. If you have a loss, you may need to file Form 8582 to apply a limitation that may reduce your loss. See the Instructions for Form 8582.
Reporting your net profit or loss. Once you have figured your net profit or loss, report it as follows.
Individuals. Enter your net profit or loss on line 31 and include it on Sched- ule 1 (Form 1040), line 3. Also, include your net profit or loss on Schedule SE, line 2. However, if you are a statutory employee or notary public, see Statutory employees or Notary public , later.
Nonresident aliens. Enter your net profit or loss on line 31 and include it on Schedule 1 (Form 1040), line 3. You al- so should include this amount on Sched- ule SE, line 2, if you are covered under the U.S. social security system due to an international social security agreement currently in effect. See the Instructions for Schedule SE for information on in- ternational social security agreements. However, if you are a statutory employ- ee or notary public, see Statutory em- ployees or Notary public , later.
Trusts and estates. Enter the net profit or loss on line 31 and include it on Form 1041, line 3.
Statutory employees. Enter your net profit or loss on line 31 and include it on Schedule 1 (Form 1040), line 3. Howev-
er, do not report this amount on Sched- ule SE, line 2. If you were a statutory employee and you are required to file Schedule SE because of other self-em- ployment income, see the Instructions for Schedule SE.
Notary public. Do not enter your net profit from line 31 on Schedule SE, line 2, unless you are required to file Schedule SE because you have other self-employment income. See the In- structions for Schedule SE.
You can deduct one-half of your self-employment tax on Schedule 1 (Form 1040), line 14. See the Instructions for Sched- ule SE for details.
Community income. If you and your spouse had community income and are filing separate returns, see the Instruc- tions for Schedule SE before figuring self-employment tax. Earned income credit. If you have a net profit on line 31, this amount is earned income and may qualify you for the earned income credit (EIC).
To figure your EIC, use the in- structions for Form 1040 or 1040-SR, line 27. Complete all applicable steps plus Worksheet B. If you are required to file Schedule SE, re- member to enter one-half of your self-employment tax in Part 1, line 1d, of Worksheet B.
Line 32
You do not need to complete line 32 if line 7 is more than the total of lines 28 and 30.
At-risk rules. In most cases, if you have a business loss and amounts inves- ted in the business for which you are not at risk, you must complete Form 6198 to apply a limitation that may reduce your loss. The at-risk rules generally limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the business. Check box 32b if you have amounts invested in this business for which you are not at risk, such as the following.
- Nonrecourse loans used to finance the business, to acquire property used in the business, or to acquire the business
TIP
CAUTION
!
TIP
that are not secured by your own proper- ty (other than property used in the busi- ness). However, there is an exception for certain nonrecourse financing borrowed by you in connection with holding real property.
- Cash,^ property,^ or^ borrowed amounts used in the business (or con- tributed to the business, or used to ac- quire the business) that are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance and insur- ance against tort liability).
- Amounts borrowed for use in the business from a person who has an inter- est in the business, other than as a cred- itor, or who is related under section 465(b)(3)(C) to a person (other than you) having such an interest. Figuring your loss. Before determining your loss, you must check box 32a or 32b to indicate whether the loss from your business activity is limited by the at-risk rules. Follow the instructions, next, that apply to your box 32 activity.
All investment is at risk. If all amounts are at risk in this business, check box 32a. If you answered “Yes” on line G, your loss will not be reduced by the at-risk rules or the passive activi- ty loss rules. See Line 31 , earlier, for how to report your loss. But if you answered “No” on line G, you may need to complete Form 8582 to figure your loss to enter on line 31. See the Instructions for Form 8582 for de- tails.
Some investment is not at risk. If some investment is not at risk, check box 32b; the at-risk rules apply to your loss. Be sure to attach Form 6198 to your return. If you answered "Yes" on line G, complete Form 6198 to figure the loss to enter on line 31. The passive activity loss rules do not apply. See Line 31 , ear- lier, for how to report your loss. But if you answered "No" on line G, the passive activity loss rules may apply. First complete Form 6198 to figure the amount of your profit or (loss) for the at-risk activity, which may include amounts reported on other forms and schedules, and the at-risk amount for the activity. Follow the Instructions for Form 6198 to determine how much of your Schedule C loss will be allowed.
Part V. Other
Expenses
Include all ordinary and necessary busi- ness expenses not deducted elsewhere on Schedule C. List the type and amount of each expense separately in the space provided. Enter the total on lines 48 and 27a. Do not include the cost of business equipment or furniture; replacements or permanent improvements to property; or personal, living, and family expenses. Do not include charitable contributions. Also, you cannot deduct fines or penal- ties paid to a government for violating any law. For details on business expen- ses, see Pub. 535.
Amortization. Include amortization in this part. For amortization that begins in 2020, you must complete and attach Form 4562.
You can amortize such costs as:
- The cost of pollution-control fa- cilities;
- Amounts paid for research and ex- perimentation;
- Amounts paid to acquire, protect, expand, register, or defend trademarks or trade names; or
- Goodwill and certain other intangi- bles.
In most cases, you cannot amortize real property construction period interest and taxes. Special rules apply for allo- cating interest to real or personal proper- ty produced in your trade or business.
For a complete list, see the instruc- tions for Form 4562, Part VI.
At-risk loss deduction. Any loss from this business that was not allowed last year because of the at-risk rules is trea- ted as a deduction allocable to this busi- ness in 2020.
Bad debts. Include debts and partial debts from sales or services that were in- cluded in income and are definitely known to be worthless. If you later col- lect a debt that you deducted as a bad debt, include it as income in the year collected. For details, see chapter 10 of Pub. 535.
Business start-up costs. If your busi- ness began in 2020, you can elect to de- duct up to $5,000 of certain business start-up costs. The $5,000 limit is re- duced (but not below zero) by the amount by which your total start-up
costs exceed $50,000. Your remaining start-up costs can be amortized over a 180-month period, beginning with the month the business began. For details, see chapters 7 and 8 of Pub. 535. For amortization that begins in 2020, you must complete and attach Form 4562. Deduction for removing barriers to individuals with disabilities and the elderly. You may be able to deduct up to $15,000 of costs paid or incurred in 2020 to remove architectural or trans- portation barriers to individuals with disabilities and the elderly. However, you cannot take both a credit (on Form
- and a deduction for the same ex- penditures. De minimis safe harbor for tangible property. Generally, you must capital- ize costs to acquire or produce real or tangible personal property used in your trade or business, such as buildings, equipment, or furniture. However, if you elect to use the de minimis safe harbor for tangible property, you may deduct de minimis amounts paid to acquire or pro- duce certain tangible property if these amounts are deducted by you for finan- cial accounting purposes or in keeping your books and records. If you have an applicable financial statement, you may use this safe harbor to deduct amounts paid for tangible property up to $5,000 per item or in- voice. If you don't have an applicable fi- nancial statement, you may use the de minimis safe harbor to deduct amounts paid for tangible property up to $2, per item or invoice. Only deduct these amounts as other expenses. Don't include these amounts on any other line. For details on making this election and requirements for using the de mini- mis safe harbor for tangible property, see chapter 1 of Pub. 535. Film and television and live theatrical production expenses. You can elect to deduct costs of certain qualified film and television productions or qualified live theatrical productions. For details, see chapter 7 of Pub. 535. Forestation and reforestation costs. Reforestation costs are generally capital expenditures. However, for each quali- fied timber property, you can elect to ex- pense up to $10,000 ($5,000 if married
filing separately) of qualifying reforesta- tion costs paid or incurred in 2020. You can elect to amortize the remain- ing costs over 84 months. For amortiza- tion that begins in 2020, you must com- plete and attach Form 4562. The amortization election does not apply to trusts, and the expense election does not apply to estates and trusts. For details on reforestation expenses, see chapters 7 and 8 of Pub. 535.
Paperwork Reduction Act Notice. We ask for the information on Schedule C (Form 1040) to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are com- plying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relat- ing to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section
The time needed to complete and file Schedule C (Form 1040) will vary de- pending on individual circumstances. The estimated burden for individual tax- payers filing this form is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is approved under OMB control number 1545-1974 and is shown next.
Recordkeeping......... 3 hr., 36 min. Learning about the law or the form............... 1 hr., 19 min. Preparing the form...... 1 hr., 39 min. Copying, assembling, and sending the form to the IRS...... 34 min.
If you have comments concerning the accuracy of these time estimates or sug- gestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.
Principal Business or Professional Activity Codes
These codes for the Principal Business or Professional Activity classify sole proprietorships by the type of activity they are engaged in to facilitate the administration of the Internal Revenue Code. These
six-digit codes are based on the North American Industry Classification System (NAICS). Select the category that best describes your primary business activity (for example, Real Estate). Then select the activity that best identifies the principal source of your sales or receipts (for example, real
estate agent). Now find the six-digit code assigned to this activity (for example, 531210, the code for offices of real estate agents and brokers) and enter it on Schedule C, line B. Note. If your principal source of income is from farming activities, you should file Schedule F.
Accommodation, Food Services, & Drinking Places Accommodation 721310 Rooming & boarding houses, dormitories, & workers' camps 721210 RV (recreational vehicle) parks & recreational camps 721100 Traveler accommodation (including hotels, motels, & bed & breakfast inns) Food Services & Drinking Places 722514 Cafeterias & buffets 722410 Drinking places (alcoholic beverages) 722511 Full-service restaurants 722513 Limited-service restaurants 722515 Snack & non-alcoholic beverage bars 722300 Special food services (including food service contractors & caterers) Administrative & Support and Waste Management & Remediation Services Administrative & Support Services 561430 Business service centers (including private mail centers & copy shops) 561740 Carpet & upholstery cleaning services 561440 Collection agencies 561450 Credit bureaus 561410 Document preparation services 561300 Employment services 561710 Exterminating & pest control services 561210 Facilities support (management) services 561600 Investigation & security services 561720 Janitorial services 561730 Landscaping services 561110 Office administrative services 561420 Telephone call centers (including telephone answering services & telemarketing bureaus) 561500 Travel arrangement & reservation services 561490 Other business support services (including repossession services, court reporting, & stenotype services) 561790 Other services to buildings & dwellings 561900 Other support services (including packaging & labeling services, & convention & trade show organizers) Waste Management & Remediation Services 562000 Waste management & remediation services Agriculture, Forestry, Hunting, & Fishing 112900 Animal production (including breeding of cats and dogs) 114110 Fishing 113000 Forestry & logging (including forest nurseries & timber tracts) 114210 Hunting & trapping Support Activities for Agriculture & Forestry 115210 Support activities for animal production (including farriers)
115110 Support activities for crop production (including cotton ginning, soil preparation, planting, & cultivating) 115310 Support activities for forestry Arts, Entertainment, & Recreation Amusement, Gambling, & Recreation Industries 713100 Amusement parks & arcades 713200 Gambling industries 713900 Other amusement & recreation services (including golf courses, skiing facilities, marinas, fitness centers, bowling centers, skating rinks, miniature golf courses) Museums, Historical Sites, & Similar Institutions 712100 Museums, historical sites, & similar institutions Performing Arts, Spectator Sports, & Related Industries 711410 Agents & managers for artists, athletes, entertainers, & other public figures 711510 Independent artists, writers, & performers 711100 Performing arts companies 711300 Promoters of performing arts, sports, & similar events 711210 Spectator sports (including professional sports clubs & racetrack operations) Construction of Buildings 236200 Nonresidential building construction 236100 Residential building construction Heavy and Civil Engineering Construction 237310 Highway, street, & bridge construction 237210 Land subdivision 237100 Utility system construction 237990 Other heavy & civil engineering construction Specialty Trade Contractors 238310 Drywall & insulation contractors 238210 Electrical contractors 238350 Finish carpentry contractors 238330 Flooring contractors 238130 Framing carpentry contractors 238150 Glass & glazing contractors 238140 Masonry contractors 238320 Painting & wall covering contractors 238220 Plumbing, heating & air- conditioning contractors 238110 Poured concrete foundation & structure contractors 238160 Roofing contractors 238170 Siding contractors 238910 Site preparation contractors 238120 Structural steel & precast concrete construction contractors 238340 Tile & terrazzo contractors 238290 Other building equipment contractors 238390 Other building finishing contractors 238190 Other foundation, structure, & building exterior contractors
238990 All other specialty trade contractors Educational Services 611000 Educational services (including schools, colleges, & universities) Finance & Insurance Credit Intermediation & Related Activities 522100 Depository credit intermediation (including commercial banking, savings institutions, & credit unions) 522200 Nondepository credit intermediation (including sales financing & consumer lending) 522300 Activities related to credit intermediation (including loan brokers) Insurance Agents, Brokers, & Related Activities 524210 Insurance agencies & brokerages 524290 Other insurance related activities Securities, Commodity Contracts, & Other Financial Investments & Related Activities 523140 Commodity contracts brokers 523130 Commodity contracts dealers 523110 Investment bankers & securities dealers 523210 Securities & commodity exchanges 523120 Securities brokers 523900 Other financial investment activities (including investment advice) Health Care & Social Assistance Ambulatory Health Care Services 621610 Home health care services 621510 Medical & diagnostic laboratories 621310 Offices of chiropractors 621210 Offices of dentists 621330 Offices of mental health practitioners (except physicians) 621320 Offices of optometrists 621340 Offices of physical, occupational & speech therapists, & audiologists 621111 Offices of physicians (except mental health specialists) 621112 Offices of physicians, mental health specialists 621391 Offices of podiatrists 621399 Offices of all other miscellaneous health practitioners 621400 Outpatient care centers 621900 Other ambulatory health care services (including ambulance services, blood, & organ banks) Hospitals 622000 Hospitals Nursing & Residential Care Facilities 623000 Nursing & residential care facilities Social Assistance 624410 Child day care services 624200 Community food & housing, & emergency & other relief services 624100 Individual & family services
624310 Vocational rehabilitation services Information 511000 Publishing industries (except Internet) Broadcasting (except Internet) & Telecommunications 515000 Broadcasting (except Internet) 517000 Telecommunications & Internet service providers Data Processing Services 518210 Data processing, hosting, & related services 519100 Other information services (including news syndicates & libraries, Internet publishing & broadcasting) Motion Picture & Sound Recording 512100 Motion picture & video industries (except video rental) 512200 Sound recording industries Manufacturing 315000 Apparel mfg. 312000 Beverage & tobacco product mfg. 334000 Computer & electronic product mfg. 335000 Electrical equipment, appliance, & component mfg. 332000 Fabricated metal product mfg. 337000 Furniture & related product mfg. 333000 Machinery mfg. 339110 Medical equipment & supplies mfg. 322000 Paper mfg. 324100 Petroleum & coal products mfg. 326000 Plastics & rubber products mfg. 331000 Primary metal mfg. 323100 Printing & related support activities 313000 Textile mills 314000 Textile product mills 336000 Transportation equipment mfg. 321000 Wood product mfg. 339900 Other miscellaneous mfg. Chemical Manufacturing 325100 Basic chemical mfg. 325500 Paint, coating, & adhesive mfg. 325300 Pesticide, fertilizer, & other agricultural chemical mfg. 325410 Pharmaceutical & medicine mfg. 325200 Resin, synthetic rubber, & artificial & synthetic fibers & filaments mfg. 325600 Soap, cleaning compound, & toilet preparation mfg. 325900 Other chemical product & preparation mfg. Food Manufacturing 311110 Animal food mfg. 311800 Bakeries, tortilla, & dry pasta mfg. 311500 Dairy product mfg. 311400 Fruit & vegetable preserving & speciality food mfg. 311200 Grain & oilseed milling 311610 Animal slaughtering & processing 311710 Seafood product preparation & packaging 311300 Sugar & confectionery product mfg.
Principal Business or Professional Activity Codes (Continued)
425120 Wholesale trade agents & brokers^999999 Unclassified establishments (unable to classify)
