Small business tax help website

Schedule C Income

The information on Schedule C income helps you fill out the income part of Schedule C.

What is Schedule C income?

Income is the first part of Schedule C. Schedule C income is the gross income from your business.

How to arrive at the gross profit in Schedule C?

To arrive at your gross profit (line 5), you take the total receipts or sales (line 1) and you subtract any returns and allowances (line 2) and the cost of goods sold (line 4).

To your gross profit, you add other income directly related to your business as defined on page C-3 of the Schedule C instructions (line 6) such as income from an interest bearing business checking account. This gives you your gross income (line 7).

Gross receipts or sales (line 1)

The gross receipts or sales (line 1) are the total revenue of your business from sales and services; do not include state sales tax. If the income reported is from your Form W-2 and the "Statutory employee" box on Form W-2 is checked, check the box on line 1.

If you are self employed or an independent contractor, you may receive Form 1099-MISC, Miscellaneous Income, stating the amount of nonemployee compensation you received. This amount is generally found in Box 7 (Nonemployee compensation) of Form 1099-MISC and is reported on line 1 of Schedule C.

Returns and allowances (line 2)

Returns and allowances (line 2) are the amounts covering any returned products or allowances and rebates from the sales price you made to customers. An example is a refund you made to a customer for a damaged product or unsatisfactory service.

Cost of goods sold

See Schedule C cost of goods sold.

Gross profit

Gross profit for a service business is usually equal to gross receipts. In retail or manufacturing, gross profit is equal to gross receipts minus the cost of returns and allowances and minus the cost of goods sold.