Even when you have the freedom of being your own boss, you still have to file your taxes every April just like everyone else. But you may be confused as to what IRS tax forms you need to file.
The Self-Employed File Schedule C or Schedule C-EZ
Luckily, there’s only one extra set of IRS tax forms you need to grab on top of the regular 1040 tax forms, and that is the Schedule C. This small worksheet is for everyone from independent contractors to small business owners. However, Schedule C IRS tax forms are further split into two parts: Schedule C and Schedule C-EZ.
Schedule C-EZ is much like the IRS tax forms 1040 EZ some people with simple income and deductions are allowed to file. Like with IRS tax forms 1040EZ, only people who fit into a very specific set of criteria can use it.
You can ONLY use Schedule C-EZ if you have:
- Had business expenses of $5,000 or less
- Only used the cash method for accounting purposes (no accrual method of accounting for property or items)
- Not carried an inventory of items for the business during the year
- Not had a net loss from your business
- Only had one business and had no employees
- Not claimed their house for business use
- Not experienced depreciation on items used in the business (such as computers or large equipment that you will use over more than one year)
If you’re the owner of a store, it looks like you’re out of luck. Maintaining an inventory is part of a store. So, you must opt out of using the Schedule C-EZ set of tax forms. If you managed to make the cut, then congratulations! You can use Schedule C-EZ.
The Schedule C-EZ set of tax forms is a very simple version of the Schedule C. All this form wants to know is how much you made minus how much you spent. Also, it takes into account use of your car. That’s it; you’re done with the self employed IRS tax forms!
Everybody Else Uses Schedule C
The regular Schedule C is a different story, but nothing you can’t handle. Think of it as just a more detailed version of the Schedule C-EZ set of tax forms. If you kept up with your company’s records through the year you should be fine. If not, consider going to a tax service to help you fill out the proper IRS tax forms.
Remember that on top of claiming expenses on the Schedule C set of IRS tax forms you must also fill out the 1040. The Schedule C and C-EZ IRS tax forms are simply for figuring out how much you made or lost with your self-employment, and are not a substitute for form 1040.