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9/26/2004

IRS relaxes rules for C-EZ filings by small businesses

The Associated Press

NEW YORK — The Internal Revenue Service is making it easier for the smallest of businesses to file their income tax returns, allowing more of them to use the very simple form known as Schedule C-EZ.
Whether a small business must use the regular Schedule C or can use C-EZ depends on the amount of expenses it reports to the government. Until now a company could use C-EZ if it had $2,500 or less in expenses. But with the change in regulations, that threshold is doubled to $5,000.
The agency estimates that approximately 500,000 more small businesses will be able to use C-EZ, which requires a company to report its gross receipts and total expenses.
But be aware: Like Schedule C, Schedule C-EZ is only for use by a sole proprietor. And C-EZ is only to be used by business owners reporting a profit.
If you’re reporting a loss, you must use the regular Schedule C, even if your expenses are under $5,000. Moreover, at the top of C-EZ, the IRS makes it very clear that you cannot use the simpler form if you are deducting expenses for using part of your home for business purposes.