Part I: Income

• Part I involves income, which requires the filer to report the amount of gross sales for the year. Determine gross income by subtracting returns and cost of goods from gross sales.
  
  

Part II: Expenses

• Over twenty expenses, from rent to insurance, can be listed in part II. Subtract total expenses from gross income to determine the total profit or loss for the year.
  
  

Part III: Cost of Goods Sold

• Part III is used to report inventory levels and costs. The filer will subtract this from gross sales in part I.
  
  

Part IV: Information on your vehicle

• Filers should complete Part IV only if a vehicle was used for the business. The amount of vehicle use and miles driven are calculated here. While documentation is not always required, filers should keep this for possible IRS verification.
  
  

Part V: Other expenses

• In this section filers can enter any business expenses not already listed or claimed on the form.