Schedule C Tips – Line B Business Code
The business code is used on Schedule C tax returns for home based & MLM businesses. This tells the IRS what business you are in and it also is used to calculate national averages for business income & deductions.
Most accountants, CPA’s, & DIY tax people fluff this off and sometimes end up just putting 999999 – which is an unclassified business.
There is much danger in doing this. Here are the two reason:
1.) It tells the IRS you are lazy and could care less about your return. Basically, you are snubbing them.
2.) You get into a business classification where your income and deductions will fall outside of the averages for that class.
Both of these reasons are audit material. In the last two years, people have been receiving letters stating that their deductions do not fall within the deductions for their stated classification.
The IRS is somewhat baiting you to make changes to your return and, therefore trigger an audit.
The rule I follow is to classify correctly for all of my clients.
The code 454390 is used for people who are in direct selling & mlm businesses.
Take the time to get this right!
For more information on my services CLICK HERE