J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

40.6 Filing Schedule C

In this section are explanations of how a sole proprietor reports income and expenses on Schedule C, a sample of which is on page 641. If you have more than one sole proprietorship, use a separate Schedule C for each business.

Schedule C-EZ.

This simple form is designed for persons on the cash basis who do not have a net business loss and have:

• Business expenses of $5,000 or less;
• No inventory at any time during the year;
• Only one sole proprietorship;
• No employees;
• No home office expense deduction;
• No prior year suspended passive activity losses from this business; and
• No depreciation to be reported on Form 4562.

Statutory employees.

Statutory employees report income and expenses on Schedule C. Thus, expenses may be deducted in full on Schedule C rather than as a miscellaneous itemized deduction (19.1), subject to the 2% adjusted gross income (AGI) floor on Schedule A. Statutory employees are full-time life insurance salespersons, agent or commission drivers distributing certain foods and beverages, pieceworkers, and full-time traveling or city salespersons who solicit on behalf of and transmit to their principals orders from wholesalers and retailers for merchandise for resale or for supplies.

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Filing Tip

Husband and Wife Owners Can File on Schedule C

Instead of having to file a partnership return, a husband and wife who are the sole ...