Schedule C and Expense Categories in QuickBooks Self-Employed

Schedule C Categories and How to Categorize Transactions in QuickBooks Self-Employed. In this article, You will learn about Schedule C […]

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Schedule C Categories and How to Categorize Transactions in QuickBooks Self-Employed.

In this article, You will learn about Schedule C Categories and How to Categorize Transactions in QuickBooks Self-Employed. To enhance your learning, we are here again with new topic of the day “schedule c and expense categories in QuickBooks self-employed“.

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But before we start let’s have a quick introduction about QuickBooks.
So, What is QuickBooks?

QuickBooks primarily came into Picture in 1983. This accounting software and its products are amicably caters to small and medium-sized organizations and offer on-premises accounting applications, including cloud-based versions.

Learn about Schedule C and Expense Categories in QuickBooks Self-Employed

Hope this quick introduction about QuickBooks was helpful for you. Now, we will learn about the Schedule C Categories.

Advertising

Going forward to the Advertising Category:

This category can be used to categorize the expenses which are related to the promotional services. This includes the online marketing or advertising cost, the pamphlets, business cards or any brochures or mailers costs.

The below-mentioned Transactions can be categorized as Advertising:

  • Online marketing fee
  • Banners/Holdings
  • Promotional purchases and giveaways
  • Goodies distributions which includes the logo of the business
  • Advertising fee
  • Calling/SMS advertising Cost
  • Business logo design
  • Marketing emails and direct mail campaigns
  • Sponsorships
  • TV advertising
  • Professional performance videos and CDs
  • Package design fees
  • Catalogs
  • Newspaper and magazine advertising
  • Billboards, signs, and display racks
  • Yellow Pages listings
  • Promotions and promotional events

Assets

Next Category is Assets:

Assets can be defined as the tangible items which we use to run the business and generate profit. These are the long terms purchases like computers, Machinery, furniture and fixtures.

The following categories for assets in QuickBooks Self-Employed can be used as Assets:

  • Computer
  • Machinery
  • Mobile Phones which are to be used for long term business and valued greater than $200.
  • Subscriptions/Software renewal fee (Costs greater than $200)
  • Photo Copiers
  • Photo and video equipment
  • Furniture and fixtures
  • Any Other miscellaneous tools and equipment which costs more than $200.

Car and Truck

Furthermore, the another Category is Car and Truck.

If any vehicle related to business use can be categorized into this Category. Along with that, this also includes the expenses such as Petrol/diesel, Vehicle or third party insurance and fee. Also, whenever you categorize the Car or truck expenses, it is advisable to make them as business. You should not split them between business and personal. Any personal use of the Business Car or Truck like going home or office is not deductible because these expenses are to be considered as commuting expense. You should always mark them as personal.

The following expenses can be categorized under Car and Truck:

  • Vehicle loan and loan interest
  • Gas and fuel expenses
  • Wash and road services
  • Vehicle registration
  • Vehicle insurance
  • Parking and tolls if they are related to the business travel.
  • Vehicle repairs
  • Vehicle lease

Commissions and Fees

Let’s move to the next category which is Commission and Fees.

This category can be used to categorize the expenses related to commissions and fees which are beyond the regular payments.

The following transactions can be categorized as Commissions and fees:

  • Commissions paid to outsiders agent
  • Referral Amount
  • Sale Commission
  • Brokerage
  • Shared commissions

You need to know that the above category cannot be used to record the Contractors commission or fee who are employed with the business. Also, the threshold for payment of an independent contractor is $600.If the payment amount is beyond this limit, you need to send the Contractor and the IRS a 1099-Misc.

Contract Labor

Let’s move forward to the next category which is Contract Labor. Contract labors are the people for you file the 1099-Misc.

This category can be used to categorizethe payments paid to the contractors during the financial or business year. This Category cannot be usedfor commissions or fees which are paid outside of payments for contractor labor.

The following transactions can be categorized as Contract Labor:

  • Fees paid for research and data collection outside the business
  • Fees paid for creative resources
  • Fees paid to independent or sub-contractors
  • Fees paid for additional project support

Home Office Expenses

Home office expenses are a complicated category.

Insurance

Next Category is Insurance:

This category can be used to categorized to insure the business which includes workers comp and general liability insurance. Health insurance or any personal insurance cannot be used under this category.

The following types of transactions can be categorized as insurance:

  • Property insurance for the property which is in use for the business purpose
  • Business interruption insurance
  • Fire, theft, and flood insurance
  • Business insurance
  • General liability insurance
  • Workers compensation insurance
  • Renter’s insurance
  • Errors and omissions insurance
  • Any other insurance for the offsite office or storage space.

Interest Paid

This category can be used to categorize interest for business credit cards, loan or any other business-related interest.

Professional Services and Legal Fee:

This category can be used to categorize fees paid for short-term professional advice which including lawyers and accountants. This is for assistance with specific business deals, sales transactions, or yearly taxes.

You can categorize the following types of transactions as professional services and Legal Fees:

  • Professional association membership fees and any Legal Fee for business matters
  • Website analysis Fee
  • Organizational dues and it also includes state bar dues
  • Accountant fees and short term consultation charges
  • Any one-time consultation fees
  • Logo designing fees
  • Any one time promotional Fee

Meals

Now, the next category is Meals:

This category can be used to categorize the business-related meal expenses. These are normal and required meals during the travel for the self-employment work. These meals can also include any lunch or dinner with the clients or subordinates during the business meeting within the threshold decided by the business. Generally the threshold for meals are under $75.00 and you do not need the receipt for it. However, it is advisable to keep all the receipts for future reference.

The meals which are tax-deductible can be included as Meals while traveling for training, conventions, trade shows, or conferences, Meals while traveling to meet prospects, clients, or business associates.

Apart from this, the meals which might be deductible can be included as Meals with potential clients, current clients, or business partners where you discuss business and Meals for a client or business partner’s spouse.

Office Expenses

This category can be used to categorize the office supplies added into the business during the tax year. Office expenses are the petty expenses which are incurred for the small or day to day business functions like stationary including Folders, Pens, Tape, Stapler, Stamps.

The below given transactions are to be categorized as office supplies:

  • Postage
  • Printing Papers
  • Shipping fees
  • Calendars and planners
  • Storage boxes
  • Stamps, labels, envelopes, and mailers
  • Shipping materials
  • Notepads or sticky notes
  • Calculators
  • Whiteboards and markers
  • Cleaning supplies
  • Staples, staplers, paper clips, and scissors
  • Tape, tape dispensers, and rulers
  • Water bottle delivery
  • Any subscriptions or membership fee
  • Pickup and delivery services
  • Tea/Coffee expenses
  • Shredding services
  • Backup data and archiving services
  • Office cleaning
  • Handicap access expenses
  • Any decoration Supplies

Other Business Expenses

Let’s move forward to the new category which is Other Business Expenses:

This category can be used for any other Miscellaneous expense for which there is no category is available.

The following transactions can be categorized as other expenses:

  • Uniforms
  • Memberships/subscriptions
  • Printing
  • Other business expenses

Also, know that the Donations and Political contributions are not included into this category.

Rent and Lease

This category can be used to categorize rental or lease expenses for Machinery or equipment, office space, and property rentals.

You can categorize the following types of transactions as Rent and lease:

  • Retail shops
  • Warehouse space
  • Building rent and lease
  • Portable storage units
  • Any machinery and appliance rentals for business purpose
  • Showroom space
  • Equipment rent and lease
  • Office buildings rent

Repairs and Maintenance

This category can be used to categorize expenses related to the general office repairs and maintenance. This covers required maintenance and Conservation.

The following transactions can be categorized as repairs and maintenance:

  • Cleaning Expenses
  • Electrician Expenses
  • Plumbing Repairs
  • Routine servicing for electronics appliances
  • Painting

Here is a pro tip which includes that the reasonable home office repairs are deductible. An upgrade which adds value to the property is to be considered as assets.

Supplies

This category can be used to categorize items which are used to make the products which you sell. Raw materials like fabric or other raw material in case of textile business, packaging, and shipping can be included into it. Along with that Art supplies, Food and beverages you sell as packaged goods, or any raw ingredients, any other items which you sell to clients.

Taxes and Licenses

Let’s move to the next category which is Taxes and Licenses:

The below given transactions can be used as taxes and licenses:

  • All kind of taxes which includes Property tax, Estimated taxes, Federal tax, Sales and State Taxes, Real Estate taxes for the Office Space and any Other taxes including Any other taxes imposed by the government in the city, state, or county in order to run the business
  • Apart from this, it also includes the Business licenses fee, Software licensing and renewal fees and Incorporation fees
  • Doing business as (DBA) or Fictitious Business Name one-time filing fee/Business registration fee and Business name search fees
  • Copyright application and registration
  • Trademarks and logo fees
  • Domain name search fees
  • Any fee which needs to be paid to acquire, draft, or cancel a lease or agreement

Apart from this, this category can also be used to categorize the deductible tax and license fees related to the self-employed work. The Subscription for QuickBooks Self employed also comes under this category and this can automatically categorize subscription expenses if you have the online banking facility.

Travel Expenses

Another category is Travel Expenses:

This category can be used to categorize business travel expenses and do not include the personal travel or trips.

The following transactions can be categorized as Travel:

  • Travel Expenses which are related to business Travel.
  • Accommodation Expenses along with the late check out or early check in expenses if required which are related to business travels.
  • Car Rental or any other transportation charges while on business Travel.
  • Fuel, Parking and tolls expenses which are related to business Travel.
  • Any equipment hire costs like laptop or machinery while away on business Travel.
  • Phone or internet charges while on business Travel.

Utilities

Next category is Utility:

This category can be used to categorize utility payments for the business property. If you use your home as your office, you need to adhere to the below-mentioned steps to categorize the home office expenses.

Following transactions can be categorized as utilities:

  • Water
  • Gas and electricity
  • Security related services
  • Trash collection
  • Monthly pest control service
  • Sewage services.

Learn How Schedule C Categories Appear on Reports

Run one of your financial reports to get details on transactions for each Schedule C category. These are the report layouts for each category.

Note: Since federal and state tax payments are non-deductible, they won’t show on your tax reports.

Expense CategoryAppears on Profit & Loss ReportAppears on Tax Summary ReportAppears on on Tax Details Report
AdvertisingYesYesYes
Apps/software/web servicesYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Apps/software/web services – >$200No – this is an asset and is handled on annual taxes as a deppreciable assetYes – under Business assetsYes – under Assets
Business insuranceYes – as InsuranceYes – as InsuranceYes – as Insurance
Business licensesYes – as Taxes and licensesYes – as Taxes and licensesYes – as Taxes and licenses
Business loanYes – as Loan principalYes – as Loan principalYes – as Loan principal
Business loan interestYes – as Interest PaidYes – as Interest PaidYes – as Interest Paid
ComputersYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Computers – asset, usually >$200No – this is an asset and is handled on annual taxes as a depreciable assetYes – under Business assetsYes – under Assets
Contract laborYesYesYes
CopiersYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Copiers – asset, usually >$200No – this is an asset and is handled on annual taxes as a depreciable assetYes – under Business assetsYes – under Assets
Credit card interestYes – as Interest PaidYes – as Interest PaidYes – as Interest Paid
Credit card paymentNo – this is a transferNo – this is a transferNo – this is a transfer
Equipment rent and leaseYesYesYes
Estimated taxesNoYes – Under Estimated Tax PaymentsYes – Under Estimated Taxes
Federal taxYes – as Taxes and licensesNo*Yes – as Taxes and licenses
FurnitureYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Furniture – asset, usually >$200No – this is an asset and is handled on annual taxes as a depreciable assetYes – under Business assetsYes – under Assets
Gas and fuelYes – as Car and TruckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Health Savings Account contributionNoYes – Healthcare expensesNo
Health insurance premiumNoYes – Healthcare expensesNo
Homeowner/rental insuranceNoYes – under Home office deductionYes – under Home Office Expenses
IncomeYesYesYes
Legal and professional servicesYesYesYes
Listing feesYes – as AdvertisingYes – as AdvertisingYes – under Advertising
Materials & SuppliesYesYesYes
MealsYesYesYes
Memberships/subscriptionsYes – as Other Business expensesYes – as Other Business expensesYes – as Other Business expenses
MortgageYes – as Loan principalYes – as Loan principalYes – as Loan principal
Mortgage – home officeNoNoNo
Mortgage interestYes – as Interest PaidYes – as Interest PaidYes – as Interest Paid
Mortgage interest – home officeNoYes – under Home office deductionYes – under Home office expenses
Office supplies/postageYes – as Office expensesYes – as Office expensesYes – as Office expenses
Other business expensesYesYesYes
Other commissions and feesYes – as FeesYes – as FeesYes – as Fees
Other home office expensesNoYes – under Home office deductionYes – under Home office expenses
Other interestYes – as Interest PaidYes – as Interest PaidYes – as Interest Paid
Other property insuranceYes – as InsuranceYes – as InsuranceYes – as Insurance
Other taxesYes – as Taxes and licensesYes – as Taxes and licensesYes – as Taxes and licenses
Other tools and equipmentYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Other tools and equipment – >$200No – this is an asset and is handled on annual taxes as a depreciable assetYes – under Business assetsYes – under Assets
Other vehicle expensesYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Parking and tollsYes – as Car and truckYes – as Car and truckYes – as Car and truck
Personal depositNo – doesn’t count towards income or expensesNo – doesn’t count towards income or expensesNo – doesn’t count towards income or expenses
Personal withdrawalNo – doesn’t count towards income or expensesNo – doesn’t count towards income or expensesNo – doesn’t count towards income or expenses
PhoneYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Phone – asset, usually >$200No – this is an asset and is handled on annual taxes as a depreciable assetYes – under Business assetsYes – under Assets
Photo/video equipmentYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Photo/video equipment – >$200No – this is an asset and is handled on annual taxes as a depreciable assetYes – under Business assetsYes – under Assets
PrintingYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
Property taxYes – as Taxes and licensesYes – as Taxes and licensesYes – as Taxes and licenses
Property tax – home officeNoYes – under Home office deductionYes – under Home office deduction
Referral/broker/selling feesYes – as FeesYes – as FeesYes – as Fees
Rent and leaseYesYesYes
Rent and lease – home officeNoYes – under Home office deductionYes – under Home office deduction
Repairs and maintenanceYesYesYes
Repairs and maintenance – home officeNoYes – under Home office deductionYes – under Home office deduction
Sales taxYes – as Taxes and licensesYes – as Taxes and licensesYes – as Taxes and licenses
Shipping feesYes – as Office expensesYes – as Office expensesYes – as Office expenses
State taxYes – as Taxes and licensesNo*Yes – as Taxes and licenses
Transaction/processing feesYes – as FeesYes – as FeesYes – as Fees
TransferNo – doesn’t count towards income or expensesNo – doesn’t count towards income or expensesNo – doesn’t count towards income or expenses
Travel expensesYesYesYes
UncategorizedYes – Under Other ExpensesYes – Under Other ExpensesYes – Under Other Expenses
UniformsYes – as Other business expensesYes – as Other business expensesYes – as Other business expenses
UtilitiesYesYesYes
Utilities – home officeNoYes – under Home office deductionYes – under Home office deduction
Vehicle insuranceYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Vehicle leaseYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Vehicle loanYes – as Loan principalYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Vehicle loan interestYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Vehicle registrationYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Vehicle repairsYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Wash and road servicesYes – as Car and truckYes – under Vehicle Deduction sectionYes – under Vehicle Deduction section
Source: quickbooks.intuit.com

So, In this module we have covered the topic of Schedule C and Expense Categories in QuickBooks Self . If you need further assistance or have any query, You just need to connect with Dancing Numbers team via LIVE CHAT. We will be happy to assist you.

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