Question

1. Explain how income and expenses from a sole proprietorship are reported on Schedule C and Schedule SE on the federal tax return.

Answer 1

According to schedule C, sole proprietors are used to find out the income through adding out all the items to the profits and subtracting meals and entertainment and they will file schedule c to report income or loss from business that they operated.an activity will only qualify as a business if the primary motive was earning profit.

According to schedule SE, it is used to find the income and expenses which is derived in respect of self employment.it is used to also find the benefits which is derived under social security programs. So it is a kind of self employment tax.