Schedule C

Schedule C, Profit or Loss from Business is used to report income or loss from continuously and regularly operating a business or practicing a profession as a sole proprietor to make a profit.  Part I of Schedule C asks for the business identifying information such as address, SSN or EIN.  Part II is used to report income.  Part III is for costs of goods sold, if applicable; Part IV is for information about a vehicle(s) used in the business; and Part V is for Other Expenses.

Schedule C-EZ

Schedule C-EZ, Net Profit from Business can be used instead of Schedule C if:

• there are $5,000 or less in business expenses,
• the cash method of accounting is used,
• there is no business inventory,
• the business did not have a loss in the prior year,
• the sole proprietor only had one business; and
• there were no employees during the year,
• a deduction for business use of the home was not claimed,
• a deduction for depreciation is not claimed, and
• there is no disallowed passive activity loss.

If your business meets the above requirements, you will complete Part II, Figure Your Net Profit, Part III Information for Your Vehicle.  The Net Profit goes on line 12 of Schedule 1 of Form 1040.  If the business has a loss (called Net Operating Loss), it can be carried forward to future year returns (called Net Operating Loss Deduction).

Whether Schedule C or C-EZ is used and the business had a profit, Schedule SE, Self-Employment Tax will be used to compute self-employment tax.  Schedule C or C-EZ is attached to Form 1040, Individual Tax Return.  Also, a  copy of either Schedule can be used to keep track of business income and expenses monthly, quarterly, or however often you choose then use to prepare your 1040.