In order to understand what the Schedule C-EZ is, you need to understand the format of the related IRS Form 1040 Schedule C. Are you self-employed or a sole proprietor of a small business? When you file your income tax return, you use the longer Schedule C to report your business income or loss on your personal (rather than corporate) income tax return. Your net business profits, calculated on either schedule, are summarized on the top page of your IRS 1040, US Individual Income Tax Return. You can also use either Schedule C to report wages or expenses you accumulate during a tax year if you are a statutory employee, are involved in qualified joint ventures, or have income that is reported on an IRS Form 1099-MISC, Miscellaneous Income. You need to complete either Schedule C in order to calculate self-employment tax.
Just like the 1040EZ “short form” for personal income tax, Schedule C-EZ is based on VERY simple business information. You provide information in Part I, such as name and principal business activity, your gross and net profit in Part II, and information about any vehicle expenses you want to claim, in Part III. There are eight separate questions in total; Schedule C has 48 separate questions. Both schedules are fundamentally the same. They are financial statements of profit and loss (P&L) that provide current information about operating revenue and offsetting expenses.
In order to use the Schedule C-EZ, your business or profession must:
Since both schedules help you calculate the net profit (or loss) for your business, there is no fundamental difference in the forms. However, part of successfully running your own business is to track all business expenses in order to determine how much it REALLY costs to run your business. The Schedule C might have more questions to answer but, if correct understood, helps you better identify how you spend money in the pursuit of profit. Categorizing and tracking your business-related expenses throughout the year might save you from misreading a business trend or wishful thinking. Running a successful business in a competitive world requires strategic planning and concentration on more than just business goals; you need to account for every dollar spent in pursuit of profit. Schedule C-EZ might provide the general answer about pursuing profit but it won’t identify where your money goes on the way to achieving your business revenue.
Do you have business interest in a foreign bank or have any foreign financial accounts? We have provided information especially for US taxpayers living abroad or resident aliens regarding filing a personal income tax return. The Internal Revenue Service (IRS) has updated their Frequently Asked Questions (FAQ) regarding Foreign Bank and Financial Accounts (commonly referred to as FBAR) including specifically updated FBAR filing requirements and updated FBAR financial accounts.
Any taxpayer who has a financial interest that exceeds $10,000 at any time during the calendar year including signature authority (or any other authority of the account) in a foreign country should review this information carefully. A “financial account” is defined as any banking institution, foreign financial securities or derivatives, or other financially related instruments.
The IRS considers a country as “foreign” if the location geographically resides outside the United States, Puerto Rico, the Northern Mariana Islands, or any territories or possessions of the US including Guam, American Samoa, and the US Virgin Islands.
The official IRS website, irs.gov, provides a variety of current and relevant topics and references for taxpayers with international financial dealings. Consult with an experienced tax professional before you file a personal income tax return that involves ANY foreign income or matters that pertain to a foreign bank and financial accounts.