Yes, there can be penalties for not reporting all income or claiming false deductions on Schedule C. It is essential to report all business income accurately and claim only legitimate deductions supported by proper documentation. The penalties for underreporting income or claiming false deductions may include monetary fines, interest charges, and potential criminal charges in severe cases of tax evasion. It is important to maintain accurate records, retain supporting documentation, and comply with the IRS guidelines to avoid penalties and ensure compliance with tax laws. If you have any uncertainties about reporting income or claiming deductions, it is recommended to consult with a tax professional to ensure proper compliance and accuracy on Schedule C.