What Tax Pros Must Understand Before Preparing a Schedule C

By Dr. Gwennetta Wright, Tax Coach

Preparing Schedule C returns is not just about filling in boxes. It is about understanding the story behind the numbers. Too many tax professionals rush through these returns without fully grasping what the IRS expects and what their client’s financials actually show.

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Before you prepare a single Schedule C, here is what you need to understand:

You Are Preparing a Business Return

This is not just income reporting. A Schedule C is a full snapshot of a client’s business activity. That includes income, expenses, and profit margins. You need to understand how their business operates day to day so the return reflects the truth.

Not All Income Is Documented on Forms

Many gig workers and small business clients will not have a clean 1099 trail. You need to know how to reconstruct income using bank statements, payment apps, and industry standards.

Every Deduction Needs Documentation

Mileage, home office, supplies, advertising—it all needs proof. Round numbers and vague expenses are red flags. Your client must be able to back up every deduction they claim.

Your Due Diligence Must Be Strong

Ask better questions. Get the details. Document client responses. The IRS is not just looking for errors. They are looking for signs of negligence.

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A Schedule C done right protects your client and your credentials. Do not treat it like a basic form. Treat it like the business return it truly is.

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