Which type of tax return must be filed if income is earned from self-employment?

• A. Form 1040
• B. Form W-2
• C. Schedule C
• D. Form 1099

Answer: (C)

When a person earns income from self-employment, they must report that income accurately to the IRS. Schedule C is specifically designed for this purpose. It is used to report income or loss from a business operated as a sole proprietorship. By completing Schedule C, individuals can detail their business income, as well as any deductible business expenses, which can reduce their taxable income.

While Form 1040 is the standard individual income tax return form that incorporates other schedules, including Schedule C, it does not solely address self-employment income. Form W-2 is issued by employers to report wages and tax withheld for employees, and is irrelevant for self-employed individuals. Form 1099 is used to report various types of income other than wages, salaries, and tips, and would also not be applicable for reporting self-employed income in the same detailed manner as Schedule C.

Therefore, Schedule C is essential for any self-employed individual to accurately report their earnings and expenses in relation to their business activities.