Think of Schedule C as your business’s financial report card. It tells the IRS how much you earned and what you spent to keep your business running. And here’s the good news: filling it out correctly can save you money by lowering your taxable income with deductions like mileage, home office expenses, and business supplies.
In this guide, we’ll walk you through Schedule C step by step, breaking down each section in plain English, helping you avoid costly mistakes, and showing you how to maximize your deductions. By the end, you’ll feel confident about completing your Schedule C the right way and keeping more of your hard-earned income.
And if you’ve been using Everlance or another tool to track your expenses and miles throughout the year, the process will be even easier.
Schedule C (Form 1040) is used by self-employed individuals, freelancers, independent contractors, and small business owners to report business income and expenses to the IRS. If you earned money as a 1099 worker, gig worker, or side hustler, you’ll likely need to file Schedule C as part of your tax return.
What counts as operating a business? Engaging in any activities where:
You’ll notice that formally incorporating your business is not one of the criteria! As long as your goal is to make money, you’re running a business. In fact, that’s the definition of a sole proprietor - someone who owns an unincorporated business by himself or herself. You may have employees that work for you and that you pay, but it’s still considered a sole proprietorship if you’re the only one who pays income taxes on the profits earned from the business.
Before you start filling out Schedule C (Form 1040), you’ll need to gather key financial records to accurately report your income and expenses. If you’ve been using a tool like Everlance to track expenses and mileage, this step will be quick and easy, but if not, now’s the time to get organized.
The hardest part of Schedule C isn’t filling out the form, it’s having the right numbers ready. Once your records are in order, it’s simply a matter of entering the data into the right fields. Let's dive into what you'll need before you go to fill this crucial form out on your taxes
You can download the current version of the form from the IRS website here. If you’re using tax preparation software, it will already have the form included, but you may still find it helpful to check out what the form looks like for reference as it may not guide you through the sections in the same order.
Gather all sources of income, including:
✅ 1099 tax forms (1099-NEC, 1099-K, etc.) from clients or payment processors.
✅ Other business revenue not reported on a 1099 (cash payments, direct deposits, checks).
✅ Everlance Export: If you use Everlance, you can generate a report with your total revenue.
To maximize your deductions, you’ll need a complete record of business expenses, including:
✅ Bank & credit card statements – Review your transactions and categorize them as business or personal.
✅ Everlance Sync (Subscribers) – If your bank account is linked, your expenses are already organized by category!
✅ Year-end summaries from banks, PayPal, Stripe, etc.
If you used your car for business, the IRS requires an IRS-compliant mileage log, which must include the following for each trip
Once you have all income, expenses, and mileage in one place, filling out Schedule C is just data entry. Now, let’s go section by section and show you exactly where to enter your numbers on Schedule C, breaking down any tricky fields along the way. You can also reference the IRS’ Instructions for Schedule C for further details.
Now that you have all your business income, expenses, and mileage records, it’s time to fill out Schedule C (Form 1040).
Schedule C is divided into five main sections: Business Information (Basic business details), Income (Revenue from self-employment), Expenses (Deductions to lower taxable income), Cost of Goods Sold (For businesses that sell products), and Vehicle Information (For mileage deductions)
Let’s go through each section line by line so you can accurately complete your Schedule C and maximize your deductions.
The first section of the Schedule C asks for basic information about your business.
Line A: Enter a brief description of your business, such as “photography” or “landscaping”
Line B: Look up the relevant code from the Principal Business or Professional Activity Codes found on the last three pages here and enter it in this field
Lines C: Leave this field blank unless you’ve given your business a specific name, such as “Cary’s Cupcakes”
Line D: Leave this field blank unless you have applied for and received an Employer ID Number; do not enter your social security number here!
Line E: Enter the address that you operate your business out of. If you primarily work out of your home or spend most of your time in your car, enter your home address.
Line F: Select the accounting method, cash or accrual, you use when calculating your income and expenses. Not sure which one to choose? Here’s a quick explanation of each to help you determine which describes your business.
Line G: Were you regularly involved in your business? If so, check “yes.”
Line I: Did you hire a subcontractor to help with your business and pay them more than $600? If so, check “yes,” and note that you’ll need to file a Form 1099 for them so they can properly file their taxes too.
Okay, great job so far! We’ve made it through the first section. In the next part we'll break down your income.
Here’s the section where you’ll list the money that your business brought in during the year.
Line 1: Enter the total dollar amount that you earned, including compensation that was reported to you on a 1099 tax form and money you earned from providing goods or services
Line 2: Enter the total amount of cash or credit refunds you gave to customers
Line 4: Skip this line for now. After you calculate your Cost of Goods Sold in Part III, you’ll copy it into this field.
Line 6: If you earned any other income, such as an award or federal tax credits, list it here.
Not too bad so far, right? Well, get ready, because the next section is typically the most work, but well worth it. You’ll be adding up all your expenses, which count as deductions to lower your overall tax bill!
In lines 8-27, you will list all the money you spent on your business, broken down by specific categories.
If you drive for work, the Car and truck expenses (line 9) can really add up. It's also a bit more complicated than some of the other categories, so we’ll dive deeper into it first.
There are two methods you can use to claim car-related expenses.
In addition, you can deduct work-related parking fees and tolls on top of whatever you’ve already calculated. Tally all these up, add them to the expenses determined using the standard mileage rate method or actual expense method and enter the total on line 9 of the Schedule C.
Luckily, the rest of the expenses are a bit more straightforward. We’ll touch briefly on the most common ones to watch out for and the relevant Everlance expense category to reference for each. Check out this article for more details on deductible business expenses.
Line 8 Advertising: Enter your total from the Advertising and Marketing category, which can include expenses like business cards and online ads
Line 15 Insurance (other than health): As the name makes clear, this item should not include the cost of any health insurance–those expenses are deductible, but are entered on your Schedule 1 instead. It also should not include the cost of your car insurance, as those expenses are already accounted for in line 9 Car and truck expenses. So what should it include? If you bought any business insurance, such as general liability insurance or malpractice insurance you can enter it on this line.
Line 16 Interest: Enter your total from the Loan Interest (Small business, etc.) category, which can include interest paid on business credit cards or loans, on line 16b. For line 16a, you can only include any interest on a mortgage that was for business purposes only, not for an office in your home. If you have a mortgage on your main home where you have a home office, that expense will be accounted for on line 30.
Line 18 Office expenses: Enter your total from the Office Expenses category, which can include items like office cleaning and decorating expenses. Similar to the above, if you have a home office and pay rent or a mortgage on your home, those expenses should not go here.
Line 20 Rent or lease: We’re probably starting to sound like a broken record right about now, but rent payments for your home and lease payments for your car can not be included on this line because they’re already included elsewhere. Only rent for equipment, such as computers and copiers, or building and land, such as retail or warehouse space, can be entered here.
Line 23 Taxes and licenses: Enter your total from the Software category, along with expenses like business licenses and permits, professional licenses & renewal fees and payroll taxes.
Note: This line is where the cost of your Everlance software license is deducted. That’s right, your Everlance premium subscription is a tax-deductible business expense!
Line 24: Travel and Meals: Enter your total from the Business Travel category on line 24a, and your total from the Business Meals category on line 24b.
Line 25 Utilities: Enter the portion of your Mobile Phone Plan that is used for business. Unless you have a second phone plan for business use only, you typically can not deduct your entire cell phone bill–only a portion based on the percentage of time you use your phone for business vs. personal purposes.
Line 27a-29: Skip these ones for now. We’ll come back to them after completing Part V: Other Expenses.
Line 30: Expenses for business use of your home. If you use part of your home exclusively for business or storing inventory, you have two methods you can use to calculate your deduction, similar to your vehicle and car expenses.
Lines 31 and 32: Skip these ones for now too. They’re part of the grand finale when we discuss what’s next.
And give yourself a pat on the back! You’ve finished the biggest chunk of the whole Schedule C tax form.
(This section applies if you sell physical products. Many freelancers and gig workers can skip this)
The cost of goods sold includes all of your costs for making products, storing them and shipping them to customers.
Line 33: Select the accounting method, cost or lower of cost or market, you use when valuing your inventory at the end of the year. Not sure which one to choose? Here’s a quick explanation of each to help you determine which describes your business.
After filling in your amounts for lines 35-41, calculate your cost of goods sold by subtracting line 41 from line 40. Don’t forget to go back to Part I and enter this amount on Line 4 too.
If you claimed car or truck expenses on Line 9 of the form, you’ll need to complete this section with details to help substantiate your deduction.
Line 43: Enter the date you started using your vehicle for business. It doesn’t have to be the date you acquired the vehicle, just the date you started driving for work.
Line 44: Refer to your mileage log or mileage tracking app to get your annual mileage for each purpose:
When listing the mileage, please don’t guess. The IRS has specific requirements for keeping a mileage log to back up these numbers.
We’re in the home stretch now!
If any of your business expenses don’t fit into the categories listed in Part II, list them here. Common expenses for this section include:
Once you total them up on line 48, remember to go back and enter this amount on line 27a too. Then you calculate line 28 Total expenses and line 29 Tentative profit (or loss) too.
Congratulations! You’ve reached the end of the Schedule C tax form. Remember lines 31 and 32 that we skipped earlier? We’ll revisit them now.
All of the work you’ve done boils down to line 31 Net profit (or loss). Subtract line 30 from line 29, and this is the amount the IRS considers your business income or loss.
If line 31 is a negative number, meaning your business had a loss, you’ll also need to check either box 32a or 32b indicating how much of your investment is at risk.
The next step is to copy your line 31 net profit (or loss) number to two other tax forms:
That’s it in terms of completing your Schedule C tax form, but if you aren’t sure how to track mileage for taxes yet, you should also take the next step of signing up for Everlance. It’s free to get started, and you’ll be thanking yourself come this time next year!
All you’ll have to do is download your mileage and transaction data, and you’ll be organized and ready to fill out your Schedule C tax form.
NOTE: Your tax situation is unique—just like you! This blog represents generalized tax information. Everlance Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about Everlance. If you need income tax advice, please contact a tax professional in your area.
Filing taxes as a self-employed worker can feel overwhelming, but it doesn’t have to be. If you’re a freelancer, gig worker, small business owner, or side hustler, you’ll likely need to file Schedule C (Form 1040) to report your business income and expenses.
Everlance helps over 4 million independent workers automatically track their income and expenese throughout the year, making tax time a breeze
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Brad Thibeau is the Head of Growth & Partnerships at Everlance. Brad has worked at Everlance since 2021 with a focus on helping self employed people save time and money on their taxes.
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