Completing and Filing Schedule C-EZ
Most small businesses must use Schedule C to calculate their business taxes. Schedule C lists the business income and expenses and calculates the net income of the business.
Some small companies may be able to use Schedule C-EZ instead. Schedule C-EZ lists only the primary information about the business and includes only a simple calculation of business profit (net income).
The IRS says:
Small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C.
You must meet all of these requirements to use Schedule C-EZ:
- Had business expenses of $5,000 or less during the year
- Use the cash method of accounting
- Had no inventory at any time during the year
- Did not have a net loss from your business; in other words, your business had a profit for the year
- Had only one business as either sole proprietor, qualified joint venture, or statutory employee
- Did not receive any credit card or similar payments other than those included in your business income
- Had no employees during the year
- Had no depreciation or amortization for the business
- Did not deduct expenses for business use of your home, or
- Did not have prior year unallowed passive activity losses from the business
The requirement about business types might be a little confusing, so here's more information on the types of businesses that can file Schedule C-EZ (noting that you can have only one business):
If your business doesn't meet all the requirements to use Schedule C-EZ, you will need to use the regular Schedule C to file your small business taxes.
Small businesses that file Schedule C-EZ for their business taxes must also pay self-employment taxes (Social Security and Medicare tax) on the profit of those businesses. You will need to complete Schedule SE to calculate your self-employment tax and add that to your income tax on your personal tax return.
Completing and Submitting the Form
Because you have a simple business, completing Schedule C-EZ is also a simplified process.
Part I: Complete the general information about your business:
Part II: Determine Net Profit
Total your gross receipts from your business. Do count income from work for others; you may receive a 1099-MISC form for this work. Don't include work for which you were an employee and received a W-2 form.
Subtract expenses from receipts to get your net profit. You may have to use additional lines to provide details on such items as meals and entertainment.
Part III: Provide information about the business use of your vehicle, if you are claiming one for business purposes, you will need to include the miles you drove for business purposes during the year, and personal miles.
That's all you need to provide on this form. Of course, you should have all the records (the IRS calls this "evidence") on your income, expenses, and vehicle, in case you get audited.
Include Schedule C-EZ with your personal tax return. The net income from Schedule C-EZ is entered on Line 12 (Business Income) on the first page of your return.