Reporting Business Income

Once you have added up all your gross “business income”, and you've dug up all your deductible business expenses for the year, you can calculate your net business income by subtracting your expenses from your income. Hopefully, you still have some income left over after expenses are deducted! This amount is your “Profit or Loss From Business” for tax purposes to be reported on Schedule C. The form can be seen at:
Schedule C

Do not included interest income earned on your business bank accounts. This is included with your other interest income, reported either directly on Form 1040 (line 6a) or on Schedule B (1040) Part 1.
Schedule B

The Internal Revenue Service will match forms 1099-MISC to your TOTAL business income to see if they can determine that you failed to report all your income. Only a small percentage of us receive “only” income reported on 1099-MISC, so this matching program of the IRS does little to insure compliance with the tax laws. Until… we are called upon for an IRS audit.

Then, the agent will took into your books to see that all income report on Form 1099-MISC was reported on your IRS Form “Schedule C (Form 1040) Profit or Loss From Business” or, if incorporated, your corporate income tax return.

For sole proprietors, the net profit or loss calculation is made on the bottom of the first page of your Schedule C (1040) or on Line 3 of your C-EZ (if Business income is under $5,000).