Future Business Leaders of America (FBLA) Business Calculations Practice Test

Which of the following forms do business owners typically use to report business income?

1. 1040

2. Schedule C

3. W-2

4. 1099

The correct answer is: Schedule C

Business owners typically use Schedule C to report business income because it directly pertains to individuals who are sole proprietors and need to report profits or losses from their self-employment activities. Schedule C is attached to the individual tax return (Form 1040) and provides a detailed breakdown of business revenue, expenses, and the net income that is subject to taxation. This form is essential for accurately calculating the taxable income derived from a business they operate as individuals. In contrast, the other forms serve different purposes. For example, Form 1040 is a general individual income tax return but does not specifically relate to self-employed business income without the inclusion of Schedule C. The W-2 is used by employers to report wages paid to employees, not for business income reporting. The 1099 form is used to report various types of income other than wages, such as freelance payments or interest income, but is not specifically tailored for self-employment income reporting by business owners. Therefore, Schedule C is the correct form for business owners to report their income.