@Taxathrone wrote:
...I did find a couple sources, fact-checked by CPAs, which indicate that reporting it on Schedule C, line 6 is what they would do (see here and here)....
Those sources are wrong. Interest paid from regular bank accounts (such as savings or bank accounts) are not business income and should not be reported on Schedule C.
The type of interest income that should be reported on Line 6 of Schedule C is interest paid on notes and accounts receivable, not interest paid on balances from bank accounts.
See https://www.irs.gov/instructions/i1040sc#idm140094051206144
If you have ever done an income tax return for a partnership/multi-member LLC or S corporation, you would have noted that interest paid by banks is reported on the K-1s and is, in turn, reported by the partners/members/shareholders on their 1040s; it does not enter into the self-employment tax matrix. In fact, the interest winds up on Schedule B if the total interest exceeds the threshold.
