Schedule C-EZ: Everything You Need to Know
Schedule C-EZ (Form 1040) is Net Profit From Business. You can use this schedule instead of Schedule C for a variety of reasons.3 min read
2. What Is the Difference Between Schedule C-EZ and Schedule C?
3. Should I Use Schedule C or C-EZ to Report Income?
4. Can I File Schedule C-EZ Instead of Schedule C?
5. Learn How to Complete a Schedule C-EZ
6. Submitting Your Schedule C-EZ
7. Schedule C-EZ and Self-Employment Taxes
What Is a Schedule C-EZ?
A Schedule C-EZ is used to report the profit that relates solely to your small business. If you are self-employed, it can be more difficult to file your tax return than if you just earn a salary as an employee. Fortunately, you can use something called a Schedule C-EZ to make the tax return process easier for yourself. If you qualify, the Schedule C-EZ can be a much easier and faster process for filing your taxes and should strongly be considered.
You should also report your income or losses in the earnings section of your 1040 form. Before deciding if you qualify for the Schedule C-EZ, you need to first understand whether you are classified as self-employed.
You can be considered self-employed if you run your own business, be it a sole proprietorship or an LLC in which you are the only owner. If you’re an independent contractor, you may also qualify as self-employed.
As you prepare a Schedule C, you will need to report your net business profits in the applicable classes listed on the form, like promoting, insurance coverage, and hiring bills, among others. The Schedule C-EZ is easier to organize because it permits you to report multiple expenses on a single line as opposed to listing them individually by class. Do not forget that you will need to make this analysis every tax year—eligibility to use the Schedule C-EZ one year doesn’t imply you are qualified to use it for all future tax years.
What Is the Difference Between Schedule C-EZ and Schedule C?
Schedule C-EZ is a basic version of Schedule C that can be used if you had only one business (statutory employee, sole proprietorship, or joint venture) and the business:
- Follows the cash method
- Has less than $5,000 of expenses
- Has no net losses
- Does not carry inventory
- Does not have workers
- Is not required to file Form 4562 for amortization and depreciation
- Does not have expenses for the office
- Does not have unallowed passive activity losses within the last year
Should I Use Schedule C or C-EZ to Report Income?
Even when your self-employment earnings are not very much, you must continue to report it to the Internal Revenue Service. If you own an unincorporated small business by yourself, the IRS considers you a sole proprietor. Schedule C is titled "Profit or Loss From Business." In the event that you run two or more sole proprietorships, you will need to file a Schedule C for each. The IRS will not penalize you for taking every professional business deduction you can.
Can I File Schedule C-EZ Instead of Schedule C?
Schedule C lists the enterprise earnings and losses and calculates the net earnings of the enterprise.
Learn How to Complete a Schedule C-EZ
When completing the Schedule C-EZ form, you will need to fill in the final details about your net business. In addition, you will need to determine your net revenue. Total your gross receipts from your business.
You will need to subtract expenses from receipts to calculate earnings. If your business expenses are higher than $5,000, you will not be able to use Schedule C-EZ; you will have to use Schedule C. When completing the Schedule C-EZ form, you will need to present details about how the car was used for business purposes, if you're claiming it. You must have all of the information, or “evidence,” for your earnings, expenses, and car, in the event that an audit is issued on your returns.
Submitting Your Schedule C-EZ
You'll include the Schedule C-EZ with your individual tax return.
Schedule C-EZ and Self-Employment Taxes
Small companies that file a Schedule C-EZ for their business taxes should also pay self-employment taxes (Social Security and Medicare tax) on the revenue of these companies. You will want to finish Schedule SE to calculate your self-employment tax and add that to your earnings tax in your individual tax return.
If you need help completing your Schedule C-EZ, you can post your job on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.