Registered Tax Return Preparer RTRP Practice Exam

The income reported on Schedule C is specifically business income derived from a sole proprietorship. Schedule C, also known as Form 1040, is used by individuals who are self-employed or who operate a business as a sole proprietor. It allows tax filers to report their profits or losses from their business activities. This includes income from selling products or providing services, as well as any associated expenses that can be deducted to reduce the taxable income.

In contrast, investment income is reported on different forms, such as Schedule D for capital gains or interest income, and unemployment benefits are reported as ordinary income on the main tax return form, rather than on Schedule C. Passive income generally refers to earnings from rental properties or limited partnerships and is reported on Schedule E, not Schedule C. Thus, the focus of Schedule C is solely on the income and expenses related to a self-owned business venture.