Your business may have become eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business profit and loss on your tax year 2004 federal income tax return, according to the IRS. That's because the deductible business expense threshold for filing Schedule C-EZ of the Form 1040 has doubled to $5,000 from $2,500. This change allows an additional 500,000 small businesses to file the C-EZ rather than Schedule C.
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 consists of an instruction page and a one-page form with three short parts — General Information, Figure Your Net Profit, and Information on Your Vehicle. The instruction page includes a worksheet for figuring the amount of deductible expenses. If that amount does not exceed $5,000, you should be able to use the C-EZ instead of Schedule C.
The more complex 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 — and a section for general information. It requests more detailed information than does the C-EZ. The instruction package is nine pages long. Schedule C must be used when deductible business expenses exceed $5,000.
This change should save time and money and reduce paperwork burden for the newly-eligible businesses.
Publication 334, Tax Guide for Small Business (PDF 407K)
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