Lesson 7
Income Part 4
Self-employment
Section D
VITA/TCE
TRAINING 101
While this training has a lot of information, entering a Schedule C is really not difficult at all.
Remember
Self Employment Examples
Some Common ones we see:
Uber/Lyft
Uber eats/Instacart/Doordash
Realtors
Landscapers
Janitorial
Home Health Care
Handyman/construction
Hair/Nails/Beauty
Tutors
Scope of Service
What’s Allowed for VITA Program
• Have less than $50,000 in business expenses
• Have no inventory at any time during the year
• Did not have a net loss the business
• Have no employees during the year and did not pay contract labor
• No Depreciation (equipment cost must be less than $2,500 per item-if it is more, they must go to a paid-preparer as the have to depreciate the item)
• NO expenses for business use of a home
• Only Standard Mileage rate for car—not actual expenses
What is Depreciation?
Examples of assets that may be depreciated:
Vehicles used for business Computers
Equipment Machinery and tools
Furniture used in the business
What is Depreciation?
Mr M Owen bought a riding lawn mower for $3,500.
The riding lawn mower is expected to help the business earn money for several years, not just the year it was purchased.
Because the mower will generate income in future years, the IRS generally requires the cost of the mower to be spread over the years it is used rather than deducted all at once in the year it was purchased.
This matching of income and expenses is called depreciation.
Depreciating an item is a very complex process and requires great record keeping and more than just spreading the cost out. Some assets may have to be depreciated over as few as 3 years, while others may be depreciated over 20, 27.5, or even 39 years.
Depreciation is Out of Scope for the VITA Program.
Not Every Asset Must Be Depreciated!!!
If a business purchases an asset:
The taxpayer may elect to deduct the entire cost of that item as a business expense in the year it was purchased, instead of depreciating it.
This election is called taking the De Minimis Safe Harbor Election, and it must be reported to the IRS that the this safe harbor election was made.
Example:
To use the De Minimis Safe Harbor Election – enter the item and cost in the Schedule C (I will show you how later in this training)
Then enter the Deminimis Explanation
You can search by word
Or go to Misc. Forms
It will add this explanation to the return for you
Depreciation what is required and What VITA Can & Can’t Do
So, always ask something like:
“Did you purchase any equipment, tools, computers, vehicles, lawn mowers, machinery, or other business assets during the year”
Scope of Service
What’s Allowed for VITA Program
Remember....
We can only do simple returns
Forms Needed
Some Red Flags
These don’t necessarily mean they are filing a fraudulent return
Again, emphasize to taxpayers that in the event of an IRS audit, they would need to provide receipts to support their reported income and expenses.
Income
(Ex: a homeowner hires a landscaper to cut his grass-pays him $50 cash)
(Ex: a company hires someone to clean their office and pays them with a $120 check)
(Ex: Square, Uber, Instacart, Paypal, etc.)
Income received all sources in a self-employed taxpayer’s business must be reported.
Income Records
Income Records
Example:
Kevin is responsible for keeping track of all the income he receives his self-employment, and he MUST report it on his tax return.
Ask questions, not just for forms.
1099-NEC Non-Employee Compensation
Box 1b, 1c, 1d, and 3 are new boxes
Box 1a = Total Nonemployee Compensation
Box 1b = Cash Tips (already included in Box 1a) *
Box 1c = Treasury Tipped Occupation Code (TTOC) *
Box 1d = Overtime Compensation (already included in Box 1a) *
Box 4 = Federal Income Tax withheld
$15,000.00
$3,250 103
Note: Only mentioning this because its new,--Box 3, we will probably never see this at a VITA site- Box 3 reports excess golden parachute payments. These are special payments made to certain executives when a company is sold, merges, or changes ownership.
1099-NEC Non-Employee Compensation
Tip and Overtime Income
Note: To claim the deduction on Tip and Overtime income the self employment job, the tips and overtime must be reported on the 1099-NEC.
If it is not reported on a 1099-NEC, then the taxpayer cannot claim the deduction.
Deduction should be calculated automatically.
$15,000.00
$3,250 103
Note: Only mentioning this because its new,--Box 3, we will probably never see this at a VITA site- Box 3 reports excess golden parachute payments. These are special payments made to certain executives when a company is sold, merges, or changes ownership.
1099-K 3rd Party Transactions
Starting in 2025, Form 1099-K does not need to be issued unless
$20,000 in payments were received AND 200+ transactions.
(Credit Cards)
Note: To claim the deduction on Tip income the self employment job, the tips must be reported on the 1099-NEC or 1099-K.
If it is not reported on a 1099-NEC or 1099-K, then the taxpayer cannot claim the deduction.
Deduction should be calculated automatically by Taxslayer when entered.
Income
Remember– ALL income needs to be reported,
always ask
“Did you make any other income.”
Expenses
Must be both
ordinary and necessary for that business.
All ordinary and necessary expenses
incurred in a self-employed taxpayer’s business
must be reported.
Business Expenses
Tools/Equipment
Examples:
POWER SANDER – DE MINIMIS ASSET $299
RIDING LAWNMOWER- DE MINIMIS ASSET $1,129
Or go to Misc. Forms
It will add this explanation to the return for you
Then enter the Deminimis Explanation
You can search by word
Vehicle Expenses
Allowable Mileage
Between Business Stops Not to/ Home
Uber & Lyft
Uber: These days, the Uber driver app attempts to track all the miles you drive while you have the app open: your online miles.
These can include the miles you drove on the way to a pickup, with a passenger — or UberEats delivery — in the car, and while waiting for your next trip. (This hasn’t always been the case).
Lyft: Lyft starts tracking mileage when the job is accepted to when the passenger is dropped off. Mileage after dropping client off to a gas station to refuel, or to the airport or other staging area for the next job are not counted.
Mileage Home to picking up first client or to home after dropping off last client are not allowed. These are Considered “Commuting” miles.
Uber & Lyft- Mileage
Uber & Lyft provide their drivers with end of year statements.
Do not do returns without this form!!!
Uber & Lyft- Statements
1099-K will be issued since there are more than 200 transactions and over $20,000 in ride payments customers.
1099-NEC will be issued since over $2,000 non-driving income like bonuses/incentives.
Sample Lyft- Statements – Income & Expenses
Enter these expenses under Commission & Fees
Lyft charges driver’s fees for using the app, finding riders, and processing payments. Remember, Lyft is a for profit business.
If Tip income is NOT reported on a 1099-NEC or 1099-K, the taxpayer cannot take the deduction for tip income– See Lesson 12B
1099-K will probably NOT be issued since there are less than 200 transactions and less that $20,000 in ride payments customers
1099-NEC will probably NOT be issued since less that $2,000.
Sample Lyft- Statements – Income & Expenses
Enter these expenses under Commission & Fees
Lyft charges driver’s fees for using the app, finding riders, and processing payments. Remember, Lyft is a for profit business.
IMPORTANT!!: If Tip income is NOT reported on a 1099-NEC or 1099-K, the taxpayer cannot take the deduction for tip income– even if it is listed on the year end statement .See Lesson 12B
Sample Uber Statement
If Gross Trip earnings are over $20,000 it will be on 1099-K
All income must be reported
even if a tax form is not received
If Form 1099-NEC and Form 1099-K are NOT issued, the Schedule C for this person
MUST INCLUDE ALL $14,382 earned.
If total additional earnings are over $2,000 will be on 1099-NEC
1099-NEC may not be issued in this case
1099-K may not be issued in this case
Sample Uber Statement
Note Uber on Tax deduction for qualified tips
Remember: To claim this deduction, the IRS requires that tip income be reported on a 1099 Tax Form.
If the Taxpayer does not meet the IRS threshold to receive a 1099, they can opt in to receive Forms 1099-K (and 1099-NEC, if applicable) by updating their W-9 form through the web driver portal or the Uber Driver app. ☺ Great News!
This can help support their claim for a federal deduction on qualified tips.
At the time I created this training, no other service that I could find published a similar opt-in process. (Not Lyft, Door Dash, Grub Hub, or Instacart).
With the gas price increases in 2026, mileage will need to be reported in 2 parts.
Total mileage :
January –June 2026. The system will automatically calculate a vehicle credit of $0.725 per mile.
And July – December 2026.The system will calculate a vehicle credit of $0.76 per mile.
Sample Lyft- Statements – Mileage Breakdown
Note: Many Taxpayers drive for multiple platforms-you can combine them all on the same Schedule C. I recommend you enter all 1099-Ks separately – this avoids addition errors and the reviewer to also re-add them. It also prints out a nice itemized list at the end of the return for the taxpayer and IRS- for record keeping and audits. Super fast and easy to do.
DoorDash & Instacart
DoorDash-mileage
DoorDash now reports mileage—they send the driver an email in February with an approximation of miles.
Taxpayers can call Doordash and have them resend the email if needed. (for prior years too)
Instacart-mileage
Instacart app may show mileage for individual batches, it does not provide a mileage summary by week, month or year.
Types of
Self-Employment Expenses
Remember, must be both
ordinary and necessary for that business
Clothing Expense
You can claim:
Gifts
If you give business gifts in the course of your trade or business, you can deduct up to $25 of the cost of business gifts you give to each person during your tax year. (to clients or suppliers)
Common Expenses for…
Note- Every taxpayer and business is different.
Common Expenses for…
Note- Every taxpayer and business is different.
Example of 2 Actual Taxpayers’ Expenses
Remember- Every taxpayer and business is different.
Ana
Ana’s expenses:
Carol
Carol’s expenses:
&
Multiple Schedule Cs
Notes-Multiple Schedule Cs
Schedule C’s report income/expenses for a type of business. Not by who they work for/pays them.
Ex: Tom– Drives for Uber & Lyft (Same type of work—moving people) Needs just 1 Schedule C to report ALL income form BOTH Uber & Lyft and total expenses form both.
Ex: Cindy does Doordash, UberEats, and Instacart for extra cash. All 3 of these are delivery type of work and can be combined on one Schedule C.
Different types of jobs- Different Schedule Cs--Many Taxpayers work multiple businesses to try and make ends meet. Remember Schedule Cs are by type of business.
Ex: Francois drives for UberEats, he is a real estate agent, and he is a handyman. Francois will need to complete 3 separate Schedule C’s –one for each type of work.
Combine Similar jobs of the taxpayer into one Schedule C
Notes-Multiple Schedule Cs
Schedule Cs are for Individuals- if both the Taxpayer and Spouse are both Self-employed, they each need to file their own Schedule C.
Actual VITA client:
Paul is a Flooring Contractor and also drives for Uber; his wife Ella is a Home Health Care nurse, and also drives for Uber.
Each have 2 different types of self employment so 4 Schedule Cs are entered.
Paul – Flooring Contractor
Paul- Uber
Ella – Home Health Care
Ella- Uber
You cannot combine Paul & Ella’s Uber
Entering in Taxslayer
When they have
NO 1099-NEC
Remember—all income must be reported
even if they don’t have a tax form.
Volunteer Tip- Enter all income first,
then enter expenses.
All
Self-Employment gets entered on Schedule C
***** Important!!! For Tax-preparer & Quality Reviewer***
If the Taxpayer is Married Filing Jointly, make sure you indicate who the Schedule C is for.
Reviewer– triple check this too
Remember, Social Security, Disability, and Medicare Benefits are all based on reported income and taxes reported/paid by the individual’s Social Security number.
If the Schedule C is under the wrong person, they won’t get the credits they are entitled to, some may even lose benefits, and other large financial problems can take place. It’s a mess to try and fix years later-so be mindful of this please.
Does The Client have a Business Name?
Ex: Tony’s Flooring
Or Cookie Bouquet
Do they a tax# for their Business? (most don’t)
*Most of our clients do not have a business name
or business tax number
Click this LINK to find the correct business code—if you know it, just type it
If they DO NOT have a business name or business tax number, skip the top part.
It’s okay if this top section is blank
Required
Type a Key Word for the type of Business or scroll through the categories
Ex: Rideshare Driver( Uber/Lyft)
Ex: DoorDash, Instacart–> Couriers & Messengers
Some Keywords: Janitorial, construction, health…
How to Find a Business Code
4 Sections we use
Schedule C Menu
Start by entering all Income
Enter ALL Income NOT reported on a 1099-NEC Here
Skip these 3 rows
Start by entering all Income
Click here to enter ALL INCOME here separately
Tip—IF income comes more than 1 source, enter them separately to make it easier for the Reviewer, to understand, to explain values to Taxpayer, for next year when they come back, and if they get audited. (also to prevent mathematical errors)
Example: Driver had
Uber
Lyft
$12,000
$800
$145
Cash-Tips
Note-- A summary list will print with the return showing each of these entries—LOVE IT!
General Expense Menu
Categories
Click the 3 lines to enter separate line items (see example)
Printer Ink/paper
$35.47
Postage for invoices
$ 83
Enter total
You can list totals by categories
Or you can list items separately-
-prevents addition errors
-makes reviews easier
-Provides a printed list for tracking and helps with audits
Then add expenses– 2 Menus to choose :
System will total the items
You can add other expenses here
Supra Key Fee
Scrubs
96
I like to add how I got the figure for Business use of Cell—for the Reviewer, for me when I look at return later or next year, for client in case they are audited…
Expenses- Other Expenses Allows you to enter a list of items that don’t seem to fit in the General Expense Menu
125
Everything entered here prints
on page 2 of the Schedule C
Business Mileage Expense --
Business Miles Business Miles
January 1 – June 30 July 1-December 31 Commuting Other
You can print a PDF of the Schedule C here to review it too!
Summary of all Schedule Cs
Once you complete your Schedule C you will see a Summary page showing the Total Net Income for each Schedule C and Total of all Schedule Cs on the return.
Entering in Taxslayer
With 1099-NEC
Entering in Taxslayer
With 1099-NEC
How to get started
Enter the 1099-NEC— Tip: ENTER PAYER ID # FIRST
Farm Income is Out of Scope
ALL 1099-NECs MUST be added to a Schedule C
Tip - If you have more than 1 form 1099-NEC
for that type of business:
Enter the first one and once you get to the Schedule C menu,
All other Income—cash and 1099-K Box 1a
Once ALL Income is entered, complete the Rest of the Return as before
Then Click on 1099-NEC on the left menu and enter the 2nd 1099-NEC
It’s best to enter ALL income before working on expenses.
Farm Income is Out of Scope
If adding another 1099-NEC select the correct Schedule C that this form 1099-NEC applies to—can have several!
ALL 1099-NECs MUST be added to a Schedule C
If you have more than 1 form 1099-NEC for that type of business:
All 1099-NEC need to be Carried to a Schedule C
Farm Income is Out of Scope
This needs to be fixed—or it will not calculate the Self-employment taxes correctly
and cause lots of problems.
All Income for Schedule C
🡨All Income 1099-NEC
All other Income—cash/checks and 1099-Ks for this business go here
Once ALL Income is entered,
complete the Rest of the Return as before
Client Owes?
Don’t panic— Not every VITA client gets a refund.
Many taxpayers do owe—but you don’t have to tell them they owe just yet.
Remember, the Quality Reviewer still needs to do a Quality Review, go over the information provided and entered in the tax return and speak to the Taxpayer.
If they do owe, we can advise them of their options to pay and how to avoid owing in the future.
Client Owes?
Clients who owe at end of year because of Self-employment need to know:
We Can Help:
Estimated Payments- To Avoid Owing Next Year
If they are continuing with the Self-employment work:
We can print them Estimated Payment Voucher coupons the software
Pre-paying avoids owing as much or anything later, interest, and penalties.
Pay when you earn the money not a year later when you file and it’s already spent.
We Can Help:
Suggest Increasing Withholdings elsewhere
If the Taxpayer has income :
They can increase income tax withholdings those sources to help create a “buffer” (to prepay) for next year’s tax filing.
You can print out irs.gov a new W4 (for employer) W4P (for retirement), or W4V (for Social Security withholdings). *Once processed, their current checks will be smaller because more taxes are being sent to their account at IRS for tax filing time—to reduce owing.
Clients Who Owe
Can get stuck in a Loop…
Taking Care of the Balance Due
Option 1-Make a Payment at Tax-Time
At time of filing,
Option 2- Mail in a payment
Using a Check or Money order for part or all of the balance due.
Taking Care of the Balance Due
Option 4- Set Up a Payment Plan
***Interest and penalties keep accruing over time until paid off!***
Option 3-Taxpayer goes online later and pays
With Credit/Debit Card
With Direct Debit/bank information-no fee
Schedule Cs are not difficult to do at all,
It just takes patience & educating your taxpayer.
They may not know what they need.
They may not have all the information they need with them.
There are resources/worksheets on vitaresources.net.
You can use a worksheet to gather information, and also give a blank one to the Taxpayer to complete before their appointment next tax season.
See your Site Coordinator for more information.
WOO-HOO!!!
You Did it!
Next Up: Practice 7