Your business may be eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business profit and loss on your 2006 Form 1040 federal income tax return. The maximum deductible business expense threshold for filing Schedule C-EZ is $5,000.
Schedule C-EZ, Net Profit from Business (Sole Proprietorship), is the simplified version of Schedule C, Profit or Loss from Business (Sole Proprietorship). Schedule C-EZ:
• Has an instruction page and a one-page form with three short parts — General Information, Figure Your Net Profit, and Information on Your Vehicle.
• Includes a simple worksheet for figuring the amount of deductible expenses. If that amount does not exceed $5,000, and if your business did not have a net loss, you should be able to use the C-EZ instead of Schedule C. Schedule C:
• Is two pages long and is divided into five parts — Income, Expenses, Cost of Goods Sold, Information on Your Vehicle, and Other Expenses.
• Requires more detailed information than the C-EZ. The instruction package is nine pages long.
• Must be used when deductible business expenses exceed $5,000 and/or when a business has a net loss.
Using Schedule C-EZ can save time and money and reduce paperwork burden for newly-eligible businesses. More information about Schedule C-EZ and reporting net profit for sole proprietorships can be found on the IRS Web site at IRS.gov.
- Publication 334, Tax Guide for Small Business (PDF 407K)