INSTRUCTIONS: PROFIT OR LOSS FROM BUSINESS SCHEDULE C

“Profit or Loss From Business Schedule C Step 1”

For specific instructions on lines A-J, regard pages C-2 through C-4 on the instructions by the IRS.

“Profit or Loss From Business Schedule C Step 2”

Part 1 includes gross income from what sourced derived except other provided by IRS Code. In some cases, gross income does not include extraterritorial income qualifying as foreign trade income. Form 8873 is used for extraterritorial income inclusion.

If you’re a debtor in a Chapter 11 bankruptcy case in 2011, see Chapter 11 Bankruptcy cases under the instructions for Form 1040 and Schedule SE. Refer to page C-4 for special instructions for Part 1.

“Profit or Loss From Business Schedule C Step 3”

In Part 2, certain expenses connected to property for resale or personal property need included in the inventory costs or capitalized.

Additionally, purchasers of personal property acquired for resale need to include indirect costs in inventory if annual gross receipts for the 3 prior years exceeded $10 million. Indirect costs may need capitalized as well for use in trade or business or non-inventory property for sale to customers. In such a case, reduce the amount in lines 8 through 26 and Part V by the amounts capitalized.

Regard pages C-4 through C-8 for specific instructions on each line in Part 2.

“Profit or Loss From Business Schedule C Step 4”

Certain taxpayers have an exception in Part 3. If you are a taxpayer and have annual gross receipts for 3 prior tax years for $1 million or less and your business is not a tax shelter, you can account for inventoried items the same way as materials and supplies that are not incidental. Refer to page C-8 for more information.

“Profit or Loss From Business Schedule C Step 5”

If your converted your vehicle during the year from personal to business use or vise versa, only enter the miles for the period you drove the vehicle for business. Refer to Form 2106 for more information.

“Profit or Loss From Business Schedule C Step 6”

In Part V, list expenses that were not deducted elsewhere. Do not include furniture, or replacements, permanent improvements to the property. Do not include personal expenses, charitable contributions, or fines for violating a law.