The IRS provides simplified version of Schedule C, known as Schedule C-EZ, Net Profit From Business, that can be used by some smaller businesses, especially individuals 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 youprovided you can claim every deduction to which you are entitled using the simpler form. Anything that simplifies tax return processing for the IRS is generally a good thing for the taxpayer, too.
So, you'll want to use Schedule C-EZ if you're eligible, which means that you:
- operated only one 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 from your business
- 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, 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.