Quick answer: Schedule C (Form 1040), Profit or Loss From Business, is the form most sole-proprietor side hustlers use to report business income and expenses. You fill in the header (business name, principal business code, accounting method, material participation and 1099 questions), report gross receipts in Part I, list deductible expenses by category in Part II, add cost of goods sold in Part III if you sell products, and report vehicle details in Part IV if you claim car expenses. Line 31 is your net profit or loss. That number flows to Schedule 1 of your Form 1040 for income tax and to Schedule SE for self-employment tax if your net earnings are $400 or more.
Most side hustles that are not set up as a corporation or a multi-member LLC end up on one IRS form: Schedule C. A freelance designer, a weekend dog walker, a marketplace reseller and a rideshare driver can all file the same two pages. The form looks dense the first time, yet most people use only a fraction of the lines.
This walkthrough follows the form from top to bottom in the order the IRS lays it out. It assumes you have already decided the activity is a business rather than a hobby and that you are a sole proprietor or single-member LLC. If you are still choosing a direction, start with our guide to side hustle ideas and how to start one, then come back when the first income arrives.
Sources: Internal Revenue Service, Schedule C (Form 1040) and Instructions for Schedule C (2025 tax year, the most recent filed form as of October 2026); Schedule SE instructions; Publication 334, Tax Guide for Small Business; Publication 463 (car expenses); Publication 587 (business use of your home); Form 8829 instructions. This article is general information, not tax advice. Line numbers can shift from year to year, so always check the current year’s form. Checked October 2026.
Who Files Schedule C (and Who Does Not)
The IRS instructions say to use Schedule C to report income or loss from a business you operated or a profession you practiced as a sole proprietor. Single-member LLCs that have not elected to be taxed as a corporation are treated as “disregarded entities” and also report on Schedule C.
You file one Schedule C for each separate business. Someone who drives for a delivery app and also sells handmade candles may need two forms, one for each activity, because they are different businesses with different expenses.
Schedule C is not the right form for every situation:
- Partnerships and multi-member LLCs file Form 1065 and give each owner a Schedule K-1.
- S corporations and C corporations file their own returns (Form 1120-S or 1120).
- Rental real estate usually goes on Schedule E, not Schedule C, unless you provide substantial services.
- Hobby income goes on Schedule 1 as other income, with no expense deductions, under current law. Our article on how the IRS tells a hobby from a business explains the factors.
A married couple who jointly own an unincorporated business may be able to elect “qualified joint venture” status and each file a separate Schedule C instead of a partnership return. The instructions spell out the conditions.
Before You Start: Gather These Records
Filling out Schedule C is easy when the numbers are already organized and painful when they are not. Pull these together first:
- Every Form 1099-NEC and 1099-K you received for the year.
- Your own record of all business income, including cash and payments that did not generate a form.
- A categorized list of expenses with receipts or invoices.
- A mileage log if you will claim car expenses.
- The square footage of your home and of the space used only for business, if you plan to claim a home office.
- Beginning and ending inventory figures, if you sell products.
If your records are scattered, our simple bookkeeping system for side hustle income and expenses shows how to set up categories that line up with Schedule C. Doing that once makes every future year faster.
The Header: Lines A Through J
The top of Schedule C asks a series of short questions. They take a few minutes and matter more than they look.
Line A: Principal business or profession. Describe what you do in a few words, such as “freelance graphic design” or “online resale of used clothing.”
Line B: Principal business code. Find the six-digit code that best matches your activity in the list at the end of the Schedule C instructions. The IRS uses it for statistics, and there is a general code for unclassified services if nothing fits.
Line C: Business name. Leave it blank if you operate under your own name. Enter your trade name or “doing business as” name if you have one.
Line D: Employer ID number (EIN). Enter an EIN only if you have one for this business. Most sole proprietors without employees use their Social Security number elsewhere on the return and leave this blank.
Line E: Business address. Enter it if different from your home address.
Line F: Accounting method. Most side hustlers check “Cash,” meaning you report income when you receive it and expenses when you pay them. The accrual method is less common for small service businesses.
Line G: Material participation. Check “Yes” if you materially participated in the business, which for most side hustles means you did the work yourself on a regular, continuous and substantial basis. The instructions list seven tests. This answer affects whether losses are limited under the passive activity rules.
Line H: Started or acquired this year. Check the box if this is the first year of the business.
Lines I and J: Form 1099 payments. Line I asks whether you made any payments that would require you to file Forms 1099, such as paying a contractor. Line J asks whether you filed them. Answer honestly; these questions exist because businesses that pay contractors have their own reporting duties.
Part I: Income
Part I reports what the business took in before expenses.
Line 1: Gross receipts or sales. This is the total of everything customers paid you for the year, whether or not a 1099 was issued. Include payments received through apps, marketplaces, checks, cash and bank transfers. Many people get tripped up by assuming only 1099 amounts count. The IRS is clear that all business income is reportable. Our guide to 1099-NEC and 1099-K forms for side hustles covers how to reconcile forms with your own records.
A 1099-K can include amounts that are not income, such as refunds you issued or the gross amount before platform fees. Report the gross figure, then account for refunds on line 2 and for platform fees as an expense in Part II. That keeps your return consistent with the forms the IRS received.
Line 2: Returns and allowances. Refunds and credits you gave customers.
Line 4: Cost of goods sold. This comes from Part III and applies only if you sell products.
Line 6: Other income. Items like a fuel tax credit or a prize connected to the business. Most side hustles leave this blank.
Line 7: Gross income. The form calculates line 1 minus line 2, minus line 4, plus line 6.
Part II: Expenses, Line by Line
Part II is where most of your time goes. Each line is an expense category. An expense must be ordinary and necessary for your business, as the IRS defines it, to be deductible. Here are the lines side hustlers use most often:
| Line | Category | Common side hustle examples |
|---|---|---|
| 8 | Advertising | Social media ads, business cards, website promotion |
| 9 | Car and truck expenses | Standard mileage or actual expenses for business driving |
| 10 | Commissions and fees | Marketplace selling fees, app commissions, payment processing fees |
| 11 | Contract labor | Payments to freelancers who helped you |
| 13 | Depreciation and section 179 | Larger equipment like a computer or camera (from Form 4562) |
| 15 | Insurance (other than health) | Business liability coverage |
| 17 | Legal and professional services | Tax preparation for the business, legal review of a contract |
| 18 | Office expense | Postage, printer ink, small office items |
| 20 | Rent or lease | Renting equipment or a workspace |
| 21 | Repairs and maintenance | Fixing business equipment |
| 22 | Supplies | Materials used up in the work |
| 23 | Taxes and licenses | Business licenses, permit fees, the employer share of payroll tax if any |
| 24a/24b | Travel and meals | Business travel, and the deductible portion of business meals |
| 25 | Utilities | Separate business phone line or utilities for a non-home workspace |
| 27a | Other expenses | Software subscriptions, education, platform tools, listed in Part V |
Several details catch first-time filers:
- Line 9 requires Part IV. If you claim car expenses using the standard mileage rate, you must fill out Part IV (or Form 4562) with the date the vehicle was placed in service and your total, business and commuting miles.
- Meals are limited. Business meals are generally 50% deductible, and the instructions explain the exceptions.
- Depreciation goes through Form 4562. Equipment that lasts more than a year may need to be depreciated, though many small purchases qualify for the de minimis safe harbor or section 179 expensing.
- Part V holds the leftovers. Anything that does not fit a named line gets listed in Part V with a short description, and the total moves to line 27a.
Our roundup of side hustle tax deductions and the records the IRS expects goes category by category with documentation tips.
Line 30: Business Use of Your Home
If part of your home is used regularly and exclusively for the business, you may be able to deduct a home office on line 30. The IRS offers two methods.
Simplified method. Multiply the square footage of the office, up to 300 square feet, by $5. The maximum deduction is $1,500. You enter the square footage directly on Schedule C and skip Form 8829.
Regular method. Calculate the business percentage of your home and apply it to actual expenses like rent or mortgage interest, utilities, insurance and repairs, using Form 8829. This method can produce a larger deduction for some people and involves more record-keeping.
The exclusive-use test is strict. A kitchen table used for invoicing and family dinners does not qualify. A spare room used only as a studio may. Publication 587 has the full rules and worked examples.
Line 31: Net Profit or Loss, and What Happens Next
Line 28 totals your expenses, line 29 shows tentative profit, line 30 subtracts the home office, and line 31 is the result: net profit or loss.
A net profit moves to two places:
- Schedule 1 (Form 1040), line 3, where it joins your other income and is taxed at your regular income tax rates.
- Schedule SE, where self-employment tax is figured. The IRS requires Schedule SE when net earnings from self-employment are $400 or more. Half of the self-employment tax is then deductible as an adjustment to income.
A net loss may reduce your other income, subject to rules about material participation and at-risk amounts. Line 32 asks whether all of your investment is at risk. Most side hustlers who funded the business with their own money check box 32a.
Paying tax on side hustle profit during the year, rather than all at once in April, is covered in our guide to quarterly estimated taxes for side hustles.
Part III: Cost of Goods Sold, for Product Sellers
If you sell physical products, such as resale items, crafts or printed goods, Part III calculates the cost of the items you actually sold during the year.
The basic formula is beginning inventory, plus purchases and materials, plus other costs, minus ending inventory. That result is cost of goods sold, which moves to line 4. Part III also asks which method you use to value closing inventory, usually cost, and whether there was any change in how you count inventory.
Product costs belong here rather than in Part II. Shipping supplies and selling fees generally go in Part II, while the cost of the products themselves goes through Part III. Publication 334 explains inventory rules and the small business exceptions that allow some sellers to simplify.
Common Schedule C Mistakes
A few errors show up again and again:
- Reporting only 1099 income. All business income counts.
- Mixing personal and business expenses. A personal phone plan or family groceries are not business deductions. Only the business share counts.
- Claiming a home office that is not exclusive. Shared spaces generally do not qualify.
- Skipping the mileage log. Car expenses need a record made at or near the time of the trip.
- Forgetting Schedule SE. Net earnings of $400 or more trigger self-employment tax.
- Using last year’s line numbers. The IRS updates the form; check the current version.
- Netting fees out of income. Report gross receipts and deduct fees separately so your numbers match the 1099-K.
Frequently Asked Questions
Do I need to file Schedule C if my side hustle made very little money?
Generally, business income must be reported regardless of amount. Schedule SE is required when net earnings from self-employment are $400 or more, and your overall filing requirement depends on your total income and filing status.
Can I file Schedule C if I did not get a 1099?
Yes. A 1099 is an information return, not a requirement for reporting income. Report all business income on line 1 whether or not you received a form.
Do single-member LLCs file Schedule C?
A single-member LLC that has not elected corporate tax treatment is a disregarded entity for income tax purposes, and its owner usually reports the business on Schedule C.
Where do platform fees go on Schedule C?
Marketplace and payment processing fees are commonly reported on line 10, commissions and fees. Report your gross receipts on line 1 so the totals line up with any 1099-K.
Can I claim a loss on Schedule C?
A legitimate business can report a loss, which may offset other income subject to limits. Activities that show repeated losses may draw questions about whether they are businesses or hobbies.
What is the simplified home office deduction?
It allows $5 per square foot of qualifying office space, up to 300 square feet, for a maximum of $1,500, entered directly on Schedule C line 30.
The Bottom Line
Schedule C is a summary of a year of business records. Answer the header questions carefully, report every dollar of gross receipts, put each expense on the line that matches it, add a home office only if it truly qualifies, and carry the net profit to Schedule 1 and Schedule SE. With organized books, the form becomes an hour of data entry rather than a weekend of digging. If your situation includes employees, inventory complexity or large losses, a tax professional can review the return before you file.