Schedule C (2021)

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 activity, 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 8i.

Also, use Schedule C to report (a) wages and expenses you had as a statutory employee, (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.

What's New for 2021

Standard mileage rate. The business standard mileage rate for 2021 decreased to 56 cents per mile.

Credits for self-employed persons. Extended refundable credits are available to certain self-employed persons impacted by the coronavirus. See the Instructions for Form 7202 for more information.

Business meal expense. For a limited time, business meals are 100% deductible under certain conditions. See Line 24b, later, for more information.

The COVID-19 related credit for qualified sick and family leave wages. The Families First Coronavirus Response Act (FFCRA) was amended by recent legislation. The FFCRA requirement that employers provide sick and family leave for reasons related to COVID-19 (the employer mandate) expired on December 31, 2020; however, the COVID-related Tax Relief Act of 2020 extends the periods for which employers providing leave that otherwise meets the requirements of the FFCRA may continue to claim tax credits for qualified sick and family leave wages paid for leave taken before April 1, 2021.

The American Rescue Plan Act of 2021 (the ARP) adds new sections 3131 and 3132 to the Internal Revenue Code to provide credits for qualified sick and family leave wages similar to the credits that were previously enacted under the FFCRA and amended and extended by the COVID-related Tax Relief Act of 2020. These credits under sections 3131 and 3132 are available for qualified leave wages paid for leave taken after March 31, 2021, and before October 1, 2021.

Excess business loss limitation. If you report a loss on line 31 of your Schedule C (Form 1040), you may be subject to a business loss limitation. The disallowed loss resulting from the limitation will not be reflected on line 31 of your Schedule C. Instead, use Form 461 to determine the amount of your excess business loss, which will be included as income on Schedule 1 (Form 1040), line 8o. Any disallowed loss resulting from this limitation will be treated as a net operating loss that must be carried forward and deducted in a subsequent year.

Tax Guide for Small Business (For Individuals Who Use Schedule C)

Source IRS.gov