For Sole Proprietors, Schedule C can be either your best friend or your biggest nightmare. There are parts of this two-page form that you will learn to love or grow to hate. There are five parts to Schedule C, and the purpose of this article is to help you with Part V, Other Expenses – hopefully this will become one part of Schedule C that you come to enjoy preparing.
When you look at the “big picture” of Schedule C, you see right away that Part II is called “Expenses.” This should bring a smile to the face of any savvy small business owner or self-employed person. But when you take a closer look at Part II, you see there are only about 19 expense categories. Starting with Line 8 (Advertising) and ending with Line 26 (Wages), they are listed in alphabetical order.
Perhaps you are wondering, “Only 19 expenses? You’ve got to be kidding me. Surely there are more legitimate expenses than that for the average Sole Proprietor.” And you are absolutely correct. There are literally dozens, if not hundreds, of bona fide, legally deductible business expenses you are likely to incur in your small business. It just so happens that the IRS has not gone out of it’s way to tell you what those expenses are on Schedule C.
So what’s a Sole Proprietor to do? That’s where Part V of Schedule C comes into play. Actually, Part V is an expansion of Part II, Line 27, which comes right after the Wage expense category on Line 26. Line 27 reads “Other expenses.” Ah, now we’re getting somewhere. Then comes the words, “from line 48 on page 2”. Ah, now we’re really getting somewhere. Line 48 on Page 2 of Schedule C is the summary line of Part V, Other Expenses.
So Part V is where you get to list all the “other” expenses for which the IRS didn’t happen to include a separate line in Part II. Now, take note of the simple fact that even in Part V, there are only nine blank lines to record your other expenses. Even that may not be enough space for you to record all your other expenses. So where do you put them, if you happen to have more than nine? Simply use a separate sheet of paper and label it with you full name and social security number, along with the heading “Supporting Statement for Schedule C, Line 48.” And then list all the valid expenses you have which do not happen to fall into one of the 19 expense categories found in Part II.
Looking for more small business tax tips? For a free copy of the 25-page Special Report “How to Instantly Double Your Deductions” visit http://www.YouSaveOnTaxes.com Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.