Unless the interest was earned as part of business operations (e.g. you're financing your sales, or charging interest on accounts receivable, or making loans) Interest income reported on Form 1099-INT with the tax ID of a Schedule C business should not be reported on Schedule C. It should be reported on Schedule B. Enter the 1099-INT as interest income as if it has your social security number on it. It's a similar concept as Interest income received by an S-corp - it isn't included in the calculation of "Oridnary business income (loss) " that is reported on line of the shareholders K-1. It is excluded from that calculation and reported on line 4 - Interest income. That interest income flows to schedule B of 1040. Since your filing on Schedule C, your business is a disregarded entity for tax purposes. Your interest income goes on Schedule B.
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