Registered Tax Return Preparer RTRP Practice Exam

Self-employed individuals typically report their business income and expenses using Schedule C, which is part of the Form 1040 tax return. Schedule C allows them to detail their earnings from their business, deduct qualified business expenses, and ultimately determine the net profit or loss from their self-employment activities. This net profit is then transferred to Form 1040, which is the overall income tax return for individuals.

While Form 1040 is essential for individual income tax filing, it does not specifically address the reporting of self-employment income on its own; rather, it requires the use of Schedule C for that purpose. Form W-2 is utilized by employers to report wages paid to employees and is not applicable to self-employed individuals. Form 1065 is used by partnerships to report income, deductions, gains, losses, etc., but does not pertain to individuals who are self-employed. Thus, Schedule C is the correct form for self-employed individuals to accurately report their business income.