1040 Schedule C-EZ calculates your net profit.

In order to understand what the Schedule C-EZ is, you need to understand the format of the related IRS Form 1040 Schedule C. Are you self-employed or a sole proprietor of a small business?  When you file your income tax return, you use the longer Schedule C to report your business income or loss on your personal (rather than corporate) income tax return.  Your net business profits, calculated on either schedule, are summarized on the top page of your IRS 1040, US Individual Income Tax Return.  You can also use either Schedule C to report wages or expenses you accumulate during a tax year if you are a statutory employee, are involved in qualified joint ventures, or have income that is reported on an IRS Form 1099-MISC, Miscellaneous Income.  You need to complete either Schedule C in order to calculate self-employment tax.

Why is Schedule C-EZ the “short form”?

Just like the 1040EZ “short form” for personal income tax, Schedule C-EZ is based on VERY simple business information. You provide information in Part I, such as name and principal business activity,  your gross and net profit in Part II, and information about any vehicle expenses you want to claim, in Part III.  There are eight separate questions in total; Schedule C has 48 separate questions.  Both schedules are fundamentally the same. They are financial statements of profit and loss (P&L) that provide current information about operating revenue and offsetting expenses.

Are there requirements for using the short Schedule C-EZ?

In order to use the Schedule C-EZ, your business or profession must:

• have a net profit running a business as a sole proprietor
• use the cash method of bookkeeping
• have no employees
• have neither inventory nor fixed assets
• have neither a home office deduction (IRS Form 8829) nor report depreciation (Form 4562)
• have business expenses less than $5,000

Are there disadvantages to using Schedule C-EZ?

Since both schedules help you calculate the net profit (or loss) for your business, there is no fundamental difference in the forms. However, part of successfully running your own business is to track all business expenses in order to determine how much it REALLY costs to run your business. The Schedule C might have more questions to answer but, if correct understood, helps you better identify how you spend money in the pursuit of profit. Categorizing and tracking your business-related expenses throughout the year might save you from misreading a business trend or wishful thinking.  Running a successful business in a competitive world requires strategic planning and concentration on more than just business goals; you need to account for every dollar spent in pursuit of profit. Schedule C-EZ might provide the general answer about pursuing profit but it won’t identify where your money goes on the way to achieving your business revenue.

Are you 65 or older (or under 65 and disabled)? Are  you a US citizen?  Are you a Single filer with an  adjusted gross income (AGI) less than $17,500?  Is the nontaxable portion of your Social Security or other nontaxable pensions, annuities, or disability income under $5,000?  You need to file Schedule R for a tax credit of $750! Read IRS Publication 524, Credit for the Elderly or Disabled or call 1-800-829-3676 and ask to have a copy mailed to you.

Don’t forget the IRS Helpline – 1-800-829-1040 or your nearest IRS Taxpayer Assistance Center.

If you need help filing your tax return or have questions, call 1-800-906-9887 for an IRS sponsored Tax Counseling for the Elderly. You will be provided free tax preparation and counseling if you are 60 or older and a low to middle income taxpayer. These days, most of us qualify and can use the help!

You don’t have to file your federal tax return if your gross income IS:

• For a Single person: less than $9,350 (over 64? less than $10,750)
• For Married filing jointly: less than $18,700 (one of you over 64? less than $19,800; both of you over 64? less than $20,900)
• For Head of Household: less than $12,000 (over 64? less than $13,400)
• For Married filing separately: any age, less than $3,650
• For Qualified Widow(er) with a dependent child: less than $15,500 (over 64? less than $16,150)

Don’t overlook your state tax requirements!   Use this link for state tax information.