Key takeaways
- A single-member LLC with no corporate election reports on Schedule C and Schedule SE, the same as a sole proprietor.
- Net profit on Schedule C line 31 flows to Schedule 1 and Schedule SE, and self-employment tax is figured on 92.35% of net earnings.
- Form 8829 is for the actual-expense home office method, and the simplified method at $5 a square foot skips it.
- Payroll forms such as Form 941 and Form W-2 belong to the employer, and a single-member LLC with employees is a separate entity for employment tax.
- The Form 1099-NEC threshold is $2,000 for payments made in 2026, not $600.
Schedule C is the owner's business return
Schedule C (Form 1040) reports income and expenses from a business run as a sole proprietor. The IRS instructions say net profit or loss is entered on line 31 and carried to Schedule 1 (Form 1040), line 3. Net profit also goes to Schedule SE (Form 1040), line 2, for most filers.
A single-member LLC is an entity disregarded as separate from its owner for federal income tax, unless it files Form 8832 and elects corporate treatment. Its activity therefore goes on Schedule C in the owner's name, the same as a sole proprietorship.
For employment tax, the IRS says a single-member LLC is still considered a separate entity for employment tax and certain excise taxes, so its payroll filings stand apart from the owner's return.
How the Schedule C numbers flow to the owner's return
Subtract total expenses from gross receipts to get net profit on line 31. Two lines pick up the forms most often missed: depreciation from Form 4562 goes on line 13, and the business-use-of-home deduction from Form 8829 goes on line 30.
Worked example: gross receipts of 120,000 dollars, ordinary expenses of 40,000 dollars, depreciation of 6,000 dollars from Form 4562 and a simplified home office deduction of 1,500 dollars. Total expenses are 47,500 dollars, so net profit is 72,500 dollars.
That net profit goes to Schedule SE, where 92.35% of net earnings is subject to self-employment tax. The rate is 12.4% for Social Security and 2.9% for Medicare, and the Social Security portion applies only up to the 2026 wage base of $184,500. Half of the resulting SE tax is deductible on Schedule 1. Net earnings under $400 do not require Schedule SE.
Form 4562 for depreciation and Section 179
Form 4562 is where the owner claims depreciation and amortization, makes the Section 179 election to expense certain property, and reports business use of listed property such as cars and trucks. The depreciation total is shown on Schedule C line 13.
If the client bought a vehicle or equipment in 2026, ask for the purchase date, the date it was placed in service, the cost and the business-use percentage from a mileage log. The IRS instructions say to complete Form 4562, Part V, for vehicle information when depreciation is claimed.
The common failure is a client who deducts a 4,000 dollar laptop as an office expense in the year it was bought and every year after. Keep a fixed-asset list with cost, placed-in-service date and method, then carry the depreciation figure from that list onto Form 4562 each year.
Form 8829 and the simplified home office method
Form 8829 figures the allowable expenses for business use of a home under the actual-expense method. The IRS instructions say the result is reported on Schedule C, line 30. The space generally must be used exclusively and on a regular basis for the business.
The simplified method uses $5 per square foot of qualifying space, up to 300 square feet. The 2025 Schedule C instructions state this rate and cap. Confirm it in the 2026 instructions before filing.
Worked example: a 200 square foot office in a 2,000 square foot home. The simplified method gives 200 times $5, which is 1,000 dollars. The actual method applies one-tenth to 24,000 dollars of home costs, or 2,400 dollars, but it requires Form 8829 and the full bill file. If the simplified method is elected for a home, Form 8829 is not used for that home for that year.
The single-member LLC: what changes and what does not
The default for a single-member LLC is disregarded status. The LLC files its own corporate return only if it elects corporate treatment on Form 8832, and an S corporation election is a separate filing.
Employment taxes are the exception. An LLC with employees files payroll forms in its own name, under its own employer tax account, even though its income appears on the owner's Schedule C. A client who runs payroll through the owner's personal account has a problem the Schedule C return will not fix.
If the client has filed Form 8832, do not put the LLC's profit on Schedule C. Ask for the filed copy and the effective date written on it, then prepare the return the election requires.
Employee forms that stay off the owner's return
Each employee completes Form W-4. Publication 15 (2026) asks the employer to have each new employee complete the 2026 Form W-4, so ask the client which version the payroll provider used on each start date.
Form W-2 reports wages to each employee, and Form W-3 is the transmittal that goes with the batch. The General Instructions for Forms W-2 and W-3 (2026) set February 1, 2027 for copies to employees and for Copy A to the Social Security Administration.
Form 941 is the quarterly employer return. Publication 15 (2026) lists the quarterly due dates as April 30, July 31, October 31 and January 31. An employer whose employment taxes for the calendar year will be $1,000 or less may request to file Form 944 instead.
Form 940 reports annual Federal Unemployment Tax Act (FUTA) tax. The 2025 instructions give February 2, 2026 as the due date for the 2025 return. Check the 2026 Form 940 instructions for the 2027 date before the client files.
Form 1099-NEC and the contractor side
Form 1099-NEC reports nonemployee compensation. The IRS instructions say that for tax years beginning after 2025, the minimum threshold increased to $2,000, and the instructions set January 31 for payee statements and the IRS filing. For 2026 payments, a 1099-NEC is required for each payee paid $2,000 or more. The $600 threshold that applied before 2026 does not apply to 2026 payments.
Payments to a corporation are generally excluded from Form 1099-NEC, but the exclusion does not apply to payments for legal services. A 5,000 dollar payment to a law firm organized as a corporation still belongs on the 1099 list.
Payments made by credit card, debit card or a payment app are reported by the payment settlement entity on Form 1099-K. The instructions say those payments are not reported on Form 1099-NEC, so keep them off the contractor list.
Questions to put to the client
If the LLC has never filed Form 8832, ask: “Did you ever elect to have the LLC taxed as a corporation?” A no means the LLC stays on Schedule C and Schedule SE.
If the client had any W-2 employees in 2026, ask: “Who runs your payroll, and do you have the four quarterly Form 941 summaries?” The payroll provider's reports are the source for Forms W-2 and W-3, and the Schedule C return does not replace them.
If the client paid anyone $2,000 or more for services in 2026, collect a W-9 before preparing the 1099-NEC, and ask: “Was any of this paid by card or payment app?” Those card and app payments come off the 1099-NEC list.
If the client works from home, ask: “How many square feet are used only for the business, and is it where you do most of the work?” The answer decides between the $5 simplified rate and Form 8829.
Failure modes and the fix
Failure: the 2026 contractor list uses the old 600 dollar threshold, so payees paid between 600 and 2,000 dollars are reported that should not be. Fix: filter 2026 payments at $2,000 per payee and keep the $600 list only for the 2025 return.
Failure: self-employment tax is computed on 100% of Schedule C profit. Fix: apply 92.35% first, then the 12.4% and 2.9% rates, and cap the Social Security portion at the 2026 wage base of $184,500.
Failure: the home office is claimed on the simplified rate and again on Form 8829. Fix: choose one method per home for the year and keep the records that support it.