Schedule C-EZ

May be used instead of Schedule C if you meet the following requirements: (1) your business has less than $2,500 expenses to report, (2) uses the cash method of accounting, (3) has no inventory at any time during the year, (4) you did not have a net loss from your business, (5) you had only one business as a sole proprietor, (6) you had no employees during the year, (7) you are not required to file Form 4562, Depreciation and Amortization, (8) you do not deduct expenses for the business use of your home, and (9) you do not have any prior year unallowed passive activity losses from your business.

Schedule C-EZ Tax Tips

1. Make sure you have included every business related expense on your Schedule C. Every dollar of expense reduces not only your regular income tax but also the 15.3% self-employment tax.
2. Automobile Expenses - If you use the Schedule C-EZ, you need to use the standard mileage rate for automobile expenses instead of actual expenses. In 2006, the standard mileage rate is 44.5 cents a mile. Commuting expenses are not deductible. However, if your home is your principal place of business (you qualify for the home office deduction), then any business-related commuting expenses are deductible. Also, if you are commuting to a temporary work location, your commuting expenses are deductible.
3. Telephone - Long-distance phone calls related to your business are deductible. The basic local phone costs of the first phone line in a residence is considered personal and is not deductible. However, a second phone line or additional telephone services on the first line such as call waiting may be deductible expenses.
4. Travel Expense - Travel expenses while away from your "tax home" for your business are deductible on Schedule C. Your tax home is your regular place of business. You are considered away from your tax home if you are out of the general area of your tax home for a period longer than a normal workday, and you need to sleep or rest. Deductible travel expenses include meals, lodging, transportation, automobile expense, taxi fares, telephone expense, and laundry and dry-cleaning expenses.
   
   The travel expenses of your spouse are not deductible unless your spouse is also an employee and serves a legitimate business purpose on the trip. However, you can still deduct 100% of the expenses such as automobile and lodging expense that you would have incurred anyway if you had traveled alone instead of with your spouse.
   
   Your airfare in the United States is 100% deductible, if your trip is primarily for business (airfare is 100% nondeductible if the travel is primarily for pleasure). Any expenses related to personal travel such as a quick two day sidetrip to the beach are not deductible. Expenses related to foreign travel must generally be allocated between business days and personal days unless certain exceptions are met.

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