What this line means
Business income that does not come from selling your main products or services. This includes interest earned on business bank accounts, scrap or byproduct sales, amounts recovered from previously written-off bad debts, state or local tax refunds related to business taxes, and fuel tax credits. This is not a catchall for personal income — only income connected to your business goes here.
Does this apply to you?
- You earned interest in a business checking or savings account
- You sold scrap materials, byproducts, or packaging from your manufacturing process
- You recovered a debt you previously wrote off as uncollectible
- You received a state or local tax refund for taxes you deducted as a business expense in a prior year
Easy to overlook
Recovered bad debts are income If you wrote off a client’s unpaid invoice as a bad debt expense in a prior year and the client later pays, that payment is income on line 6 in the year you receive it. Filers who wrote off the debt years ago often forget to report the recovery. 1 General filing pattern — omitted scrap and recovered bad debt income
Business bank account interest goes here, not on Form 1040 line 2b Interest earned on a business bank account is business income reported on Schedule C line 6 — not personal interest income on Form 1040. Reporting it on the wrong form does not change the income tax you owe, but it understates your self-employment income, which reduces your Social Security earnings record. 2 IRS Schedule C instructions — Line 6
Watch out for this
Reporting business bank account interest on Form 1040 line 2b instead of Schedule C line 6. The income tax is the same either way, but self-employment tax is not. Business interest on line 6 flows through net profit to Schedule SE, where it is subject to self-employment tax. Missing this means underpaying self-employment tax.
Footnotes
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IRS Schedule C (Form 1040) Instructions. See also IRS Publication 17, Your Federal Income Tax. https://www.irs.gov/pub/irs-pdf/p17.pdf ↩
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IRS Schedule C (Form 1040) Instructions, Line 6. https://www.irs.gov/instructions/i1040sc ↩