Can You Use Form C-EZ?

April 13, 2006

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The IRS does provide a simplified version of Schedule C, known as Schedule C-EZ, Net Profit From Business, that can be used by some sole proprietors, primarily those who work as independent contractors for one or more larger businesses.

Whenever you have an option as to which tax form you can use, it's generally best to use the simplest form that's available to you. There is some evidence that the IRS is less likely to scrutinize tax returns that include the "EZ" versions of the forms.

So, you'll want to use Schedule C-EZ if you're eligible, which means that you:

operated only one sole proprietorship business during the year
did not have an inventory at any time during the year
did not have any employees during the year
had total business expenses that did not exceed $5,000
do not deduct expenses for business use of your home
use the cash method of accounting
did not have a net loss
do not have any prior-year unallowed passive activity losses for this business
are not required to file a Form 4562, Depreciation and Amortization, for the year, which means that you did not place any depreciable property into service for the first time this year, and you're not claiming depreciation on any "listed property" such as a car, light truck, motorcycle, cell phone, computer or peripherals, or photographic, audio/video, or communications equipment

If you do not meet all of these requirements, you must file Schedule C this year instead of C-EZ.

Among the Business Tools are Form 1040, Schedule C and Schedule C-EZ. They are in Adobe Portable Document Format (.pdf), and you will need the free Acrobat Reader to view and print the file.