Consultants -- along with contractors and other self-employed individuals -- are considered business owners in the eyes of the Internal Revenue Service. While employee wages are reported directly on Form 1040, business income from consulting is filed on Schedule C. Complete Schedule C and record your net business profit on Form 1040 to file your taxes as a consultant,
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Report consulting revenue from all sources on part 1 of Schedule C. Reduce revenue by any returns on line 2 to arrive at your gross income on line 7.
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Reduce your gross income by any eligible business expenses in part 2. Some expenses consultants typically incur include:
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- Marketing and advertising
- Office supplies, likes pens, pencils and paper
- Computer equipment, like laptops and printers
- Business fees and other business taxes
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If you travel for your consulting work, you can list travel expense at the current IRS standard rate of 57.5 cents per mile. You can also deduct a portion of your rent, utilities and home repairs if you claim the home office deduction. You must have a dedicated space in your home that you use solely for your consulting work to claim this deduction. This means you can't work out of your family room or living room if anyone else enjoys that space.
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Subtract all your business expenses from your gross income to arrive at your net profit or loss on line 31 of Schedule C. Record this amount on line 12 of your Form 1040.
