Chapter 40

Income or Loss From Your Business or Profession

As a self-employed person, you report income and expenses from your business or profession separately from your other income, such as income from wages. On Schedule C, you report your business income and itemize your expenses. Any net profit is subject to self-employment tax, as well as regular tax. A net profit can also be the basis of deductible contributions to a SEP or Keogh retirement plan, as discussed in Chapter 41.

If you work out of your home, you may deduct home office expenses.

If you claim a loss on Schedule C, be prepared to show that you regularly and substantially participate in the business. Otherwise, your loss may be considered a passive loss deductible only from passive income, as discussed in Chapter 10.

If you have a business loss that exceeds your other income, you may carry back the loss and claim a refund. For a loss in a tax year ending in 2012, the carryback period is generally two years (40.18).

If you have no employees and business expenses of $5,000 or less, you may be able to file a simplified schedule called Schedule C-EZ (40.6).

40.1 Forms of Doing Business

40.2 Reporting Self-Employed Income

40.3 Accounting Methods for Reporting Business Income

40.4 Tax Reporting Year for Self-Employed

40.5 Reporting Certain Payments and Receipts to the IRS

40.6 Filing Schedule C

40.7 Deductions for Professionals

40.8 Nondeductible Expense Items

40.9 How Authors and Artists May Write Off Expenses

40.10 Deducting Expenses of a Sideline Business or Hobby

40.11 Deducting Expenses of Looking for a New Business

40.12 Home Office Deduction

40.13 What Home Office Expenses Are Deductible?

40.14 Allocating Expenses to Business Use

40.15 Business Income May Limit Home Office Deductions

40.16 Home Office for Sideline Business

40.17 Depreciation of Office in Cooperative Apartment

40.18 Net Operating Losses (NOLs)

40.19 Your Net Operating Loss

40.20 How To Report a Net Operating Loss

40.21 How To Carry Back Your Net Operating Loss

40.22 Election To Carry Forward Losses

40.23 Overview of the Domestic Production Activities Deduction

40.24 Qualified Production Activities

40.25 Figuring the Deduction

40.26 Business Credits

40.27 Filing Schedule F

40.28 Farming Expenses